Judgment of the Court of 27 September 1988.

   The Queen v H. M. Treasury and Commissioners of Inland Revenue, ex parte Daily Mail

   Case 81/87.

   1 . The Treaty regards the differences in national legislation concerning the connecting
   factor required of companies incorporated thereunder and the question whether - and if so how
   - the registered office or real head office of a company incorporated under national law may
   be transferred from one Member State to another as problems which are not resolved by the
   rules concerning the right of establishment but must be dealt with by future legislation or
   conventions, which have not yet been adopted or concluded . Therefore, in the present state of
   Community law, Articles 52 and 58 of the Treaty, properly construed, confer no right on a
   company incorporated under the legislation of a Member State and having its registered office
   there to transfer its central management and control to another Member State .

   2 . The title and provisions of Council Directive 73/148 of 21 May 1973 on the abolition of
   restrictions on movement and residence within the Community for nationals of Member States
   with regard to establishment and the provision of services refer solely to the movement and
   residence of natural persons, and the provisions of the directive cannot, by their nature, be
   applied by analogy to legal persons . Therefore, Directive 73/148, properly construed, confers
   no right on a company to transfer its central management and control to another Member State .

Grounds

   1 By an order of 6 February 1987, which was received at the Court on 19 March 1987, the High
   Court of Justice, Queen' s Bench Division, referred to the Court for a preliminary ruling
   under Article 177 of the EEC Treaty four questions on the interpretation of Articles 52 and 58
   of the Treaty and Council Directive 73/148 of 21 May 1973 on the abolition of restrictions on
   movement and residence within the Community for nationals of Member States with regard to
   establishment and the provision of services ( Official Journal 1973, L 172, p . 14 ).

   2 Those questions arose in proceedings between Daily Mail and General Trust PLC, the applicant
   in the main proceedings ( hereinafter refered to as "the applicant "), and HM Treasury for a
   declaration, inter alia, that the applicant is not required to obtain consent under United
   Kingdom tax legislation in order to cease to be resident in the United Kingdom for the purpose
   of establishing its residence in the Netherlands .

   3 It is apparent from the documents before the Court that under United Kingdom company
   legislation a company such as the defendant, incorporated under that legislation and having
   its registered office in the United Kingdom, may establish its central management and control
   outside the United Kingdom without losing legal personality or ceasing to be a company
   incorporated in the United Kingdom .

   4 According to the relevant United Kingdom tax legislation, only companies which are resident
   for tax purposes in the United Kingdom are as a rule liable to United Kingdom corporation tax
   . A company is resident for tax purposes in the place in which its central management and
   control is located .

   5 Section 482 ( 1 ) ( a ) of the Income and Corporation Taxes Act 1970 prohibits companies
   resident for tax purposes in the United Kingdom from ceasing to be so resident without the
   consent of the Treasury .

   6 In 1984 the applicant, which is an investment holding company, applied for consent under the
   abovementioned national provision in order to transfer its central management and control to
   the Netherlands, whose legislation does not prevent foreign companies from establishing their
   central management there; the company proposed, in particular, to hold board meetings and to
   rent offices for its management in the Netherlands. Without waiting for that consent, it
   subsequently decided to open an investment management office in the Netherlands with a view to
   providing services to third parties.

   7 It is common ground that the principal reason for the proposed transfer of central
   management and control was to enable the applicant, after establishing its residence for tax
   purposes in the Netherlands, to sell a significant part of its non-permanent assets and to use
   the proceeds of that sale to buy its own shares, without having to pay the tax to which such
   transactions would make it liable under United Kingdom tax law, in regard in particular to the
   substantial capital gains on the assets which the applicant proposed to sell . After
   establishing its central management and control in the Netherlands the applicant would be
   subject to Netherlands corporation tax, but the transactions envisaged would be taxed only on
   the basis of any capital gains which accrued after the transfer of its residence for tax
   purposes .

   8 After a long period of negotiations with the Treasury, which proposed that it should sell at
   least part of the assets before transferring its residence for tax purposes out of the United
   Kingdom, the applicant initiated proceedings before the High Court of Justice, Queen' s Bench
   Division, in 1986 . Before that court, it claimed that Articles 52 and 58 of the EEC Treaty
   gave it the right to transfer its central management and control to another Member State
   without prior consent or the right to obtain such consent unconditionally .

   9 In order to resolve that dispute, the national court stayed the proceedings and referred the
   following questions to the Court of Justice :

   ( 1 ) Do Articles 52 and 58 of the EEC Treaty preclude a Member State from prohibiting a body
   corporate with its central management and control in that Member State from transferring
   without prior consent or approval that central management and control to another Member State
   in one or both of the following circumstances, namely where :

   ( a ) payment of tax upon profits or gains which have already arisen may be avoided;

   ( b ) were the company to transfer its central management and control, tax that might have
   become chargeable had the company retained its central management and control in that Member
   State would be avoided?

   ( 2 ) Does Council Directive 73/148/EEC give a right to a corporate body with its central
   management and control in a Member State to transfer without prior consent or approval its
   central management and control to another Member State in the conditions set out in Question
   1? If so, are the relevant provisions directly applicable in this case?

   ( 3 ) If such prior consent or approval may be required, is a Member State entitled to refuse
   consent on the grounds set out in Question 1?

   ( 4 ) What difference does it make, if any, that under the relevant law of the Member State no
   consent is required in the case of a change of residence to another Member State of an
   individual or firm?

   10 Reference is made to the Report for the Hearing for a fuller account of the facts and the
   background to the main proceedings, the provisions of national legislation at issue and the
   observations submitted to the Court, which are mentioned or discussed hereinafter only in so
   far as is necessary for the reasoning of the Court .

   First question

   11 The first question seeks in essence to determine whether Articles 52 and 58 of the Treaty
   give a company incorporated under the legislation of a Member State and having its registered
   office there the right to transfer its central management and control to another Member State
   . If that is so, the national court goes on to ask whether the Member State of origin can make
   that right subject to the consent of national authorities, the grant of which is linked to the
   company' s tax position .

   12 With regard to the first part of the question, the applicant claims essentially that
   Article 58 of the Treaty expressly confers on the companies to which it applies the same right
   of primary establishment in another Member State as is conferred on natural persons by Article
   52 . The transfer of the central management and control of a company to another Member State
   amounts to the establishment of the company in that Member State because the company is
   locating its centre of decision-making there, which constitutes genuine and effective economic
   activity .

   13 The United Kingdom argues essentially that the provisions of the Treaty do not give
   companies a general right to move their central management and control from one Member State
   to another . The fact that the central management and control of a company is located in a
   Member State does not itself necessarily imply any genuine and effective economic activity on
   the territory of that Member State and cannot therefore be regarded as establishment within
   the meaning of Article 52 of the Treaty .

   14 The Commission emphasizes first of all that in the present state of Community law, the
   conditions under which a company may transfer its central management and control from one
   Member State to another are still governed by the national law of the State in which it is
   incorporated and of the State to which it wishes to move . In that regard, the Commission
   refers to the differences between the national systems of company law . Some of them permit
   the transfer of the central management and control of a company and, among those, certain
   attach no legal consequences to such a transfer, even in regard to taxation . Under other
   systems, the transfer of the management or the centre of decision-making of a company out of
   the Member State in which it is incorporated results in the loss of legal personality .
   However, all the systems permit the winding-up of a company in one Member State and its
   reincorporation in another . The Commission considers that where the transfer of central
   management and control is possible under national legislation, the right to transfer it to
   another Member State is a right protected by Article 52 of the Treaty .

   15 Faced with those diverging opinions, the Court must first point out, as it has done on
   numerous occasions, that freedom of establishment constitutes one of the fundamental
   principles of the Community and that the provisions of the Treaty guaranteeing that freedom
   have been directly applicable since the end of the transitional period . Those provisions
   secure the right of establishment in another Member State not merely for Community nationals
   but also for the companies referred to in Article 58 .

   16 Even though those provisions are directed mainly to ensuring that foreign nationals and
   companies are treated in the host Member State in the same way as nationals of that State,
   they also prohibit the Member State of origin from hindering the establishment in another
   Member State of one of its nationals or of a company incorporated under its legislation which
   comes within the definition contained in Article 58 . As the Commission rightly observed, the
   rights guaranteed by Articles 52 et seq . would be rendered meaningless if the Member State of
   origin could prohibit undertakings from leaving in order to establish themselves in another
   Member State . In regard to natural persons, the right to leave their territory for that
   purpose is expressly provided for in Directive 73/148, which is the subject of the second
   question referred to the Court .

   17 In the case of a company, the right of establishment is generally exercised by the
   setting-up of agencies, branches or subsidiaries, as is expressly provided for in the second
   sentence of the first paragraph of Article 52 . Indeed, that is the form of establishment in
   which the applicant engaged in this case by opening an investment management office in the
   Netherlands. A company may also exercise its right of establishment by taking part in the
   incorporation of a company in another Member State, and in that regard Article 221 of the
   Treaty ensures that it will receive the same treatment as nationals of that Member State as
   regards participation in the capital of the new company .

   18 The provision of United Kingdom law at issue in the main proceedings imposes no restriction
   on transactions such as those described above. Nor does it stand in the way of a partial or
   total transfer of the activities of a company incorporated in the United Kingdom to a company
   newly incorporated in another Member State, if necessary after winding-up and, consequently,
   the settlement of the tax position of the United Kingdom company. It requires Treasury consent
   only where such a company seeks to transfer its central management and control out of the
   United Kingdom while maintaining its legal personality and its status as a United Kingdom
   company .

   19 In that regard it should be borne in mind that, unlike natural persons, companies are
   creatures of the law and, in the present state of Community law, creatures of national law .
   They exist only by virtue of the varying national legislation which determines their
   incorporation and functioning .

   20 As the Commission has emphasized, the legislation of the Member States varies widely in
   regard to both the factor providing a connection to the national territory required for the
   incorporation of a company and the question whether a company incorporated under the
   legislation of a Member State may subsequently modify that connecting factor . Certain States
   require that not merely the registered office but also the real head office, that is to say
   the central administration of the company, should be situated on their territory, and the
   removal of the central administration from that territory thus presupposes the winding-up of
   the company with all the consequences that winding-up entails in company law and tax law . The
   legislation of other States permits companies to transfer their central administration to a
   foreign country but certain of them, such as the United Kingdom, make that right subject to
   certain restrictions, and the legal consequences of a transfer, particularly in regard to
   taxation, vary from one Member State to another .

   21 The Treaty has taken account of that variety in national legislation . In defining, in
   Article 58, the companies which enjoy the right of establishment, the Treaty places on the
   same footing, as connecting factors, the registered office, central administration and
   principal place of business of a company . Moreover, Article 220 of the Treaty provides for
   the conclusion, so far as is necessary, of agreements between the Member States with a view to
   securing inter alia the retention of legal personality in the event of transfer of the
   registered office of companies from one country to another . No convention in this area has
   yet come into force .

   22 It should be added that none of the directives on the coordination of company law adopted
   under Article 54 ( 3 ) ( g ) of the Treaty deal with the differences at issue here .

   23 It must therefore be held that the Treaty regards the differences in national legislation
   concerning the required connecting factor and the question whether - and if so how - the
   registered office or real head office of a company incorporated under national law may be
   transferred from one Member State to another as problems which are not resolved by the rules
   concerning the right of establishment but must be dealt with by future legislation or
   conventions .

   24 Under those circumstances, Articles 52 and 58 of the Treaty cannot be interpreted as
   conferring on companies incorporated under the law of a Member State a right to transfer their
   central management and control and their central administration to another Member State while
   retaining their status as companies incorporated under the legislation of the first Member
   State .

   25 The answer to the first part of the first question must therefore be that in the present
   state of Community law Articles 52 and 58 of the Treaty, properly construed, confer no right
   on a company incorporated under the legislation of a Member State and having its registered
   office there to transfer its central management and control to another Member State .

   26 Having regard to that answer, there is no need to reply to the second part of the first
   question .

   Second question

   27 In its second question, the national court asks whether the provisions of Council Directive
   73/148 of 21 May 1973 on the abolition of restrictions on movement and residence within the
   Community for nationals of Member States with regard to establishment and the provision of
   services give a company a right to transfer its central management and control to another
   Member State .

   28 It need merely be pointed out in that regard that the title and provisions of that
   directive refer solely to the movement and residence of natural persons and that the
   provisions of the directive cannot, by their nature, be applied by analogy to legal persons .

   29 The answer to the second question must therefore be that Directive 73/148, properly
   construed, confers no right on a company to transfer its central management and control to
   another Member State .

   Third and fourth questions

   30 Having regard to the answers given to the first two questions referred by the national
   court, there is no need to reply to the third and fourth questions .

Operative part

   

   On those grounds,

   THE COURT,

   in answer to the questions referred to it by the High Court of Justice, Queen' s Bench
   Division, by order of 6 February 1987, hereby rules :

   ( 1 ) In the present state of Community law, Articles 52 and 58 of the Treaty, properly
   construed, confer no right on a company incorporated under the legislation of a Member State
   and having its registered office there to transfer its central management and control to
   another Member State .

   ( 2 ) Council Directive 73/148 of 21 May 1973 on the abolition of restrictions on movement and
   residence within the Community for nationals of Member States with regard to establishment and
   the provision of services, properly construed, confers no right on a company to transfer its
   central management and control to another Member State .

   

   

   

   Judgment of the Court of 9 March 1999.

   Centros Ltd v Erhvervs- og Selskabsstyrelsen.

   Case C-212/97.

Summary

   It is contrary to Articles 52 and 58 of the Treaty for a Member State to refuse to register a
   branch of a company formed in accordance with the law of another Member State in which it has
   its registered office but in which it conducts no business where the branch is intended to
   enable the company in question to carry on its entire business in the State in which that
   branch is to be created, while avoiding the need to form a company there, thus evading
   application of the rules governing the formation of companies which, in that State, are more
   restrictive as regards the paying up of a minimum share capital. Given that the right to form
   a company in accordance with the law of a Member State and to set up branches in other Member
   States is inherent in the exercise, in a single market, of the freedom of establishment
   guaranteed by the Treaty, the fact that a national of a Member State who wishes to set up a
   company chooses to form it in the Member State whose rules of company law seem to him the
   least restrictive and to set up branches in other Member States cannot, in itself, constitute
   an abuse of the right of establishment.

   That interpretation does not, however, prevent the authorities of the Member State concerned
   from adopting any appropriate measure for preventing or penalising fraud, either in relation
   to the company itself, if need be in cooperation with the Member State in which it was formed,
   or in relation to its members, where it has been established that they are in fact attempting,
   by means of the formation of a company, to evade their obligations towards private or public
   creditors established in the territory of the Member State concerned.

Grounds

   1 By order of 3 June 1997, received at the Court on 5 June 1997 the Ho/jesteret referred to
   the Court for a preliminary ruling under Article 177 of the EC Treaty a question on the
   interpretation of Articles 52, 56 and 58 of the Treaty.

   2 That question was raised in proceedings between Centros Ltd, a private limited company
   registered on 18 May 1992 in England and Wales, and Erhvervs- og Selskabsstyrelsen (the Trade
   and Companies Board, `the Board') which comes under the Danish Department of Trade, concerning
   that authority's refusal to register a branch of Centros in Denmark.

   3 It is clear from the documents in the main proceedings that Centros has never traded since
   its formation. Since United Kingdom law imposes no requirement on limited liability companies
   as to the provision for and the paying-up of a minimum share capital, Centros's share capital,
   which amounts to GBP 100, has been neither paid up nor made available to the company. It is
   divided into two shares held by Mr and Mrs Bryde, Danish nationals residing in Denmark. Mrs
   Bryde is the director of Centros, whose registered office is situated in the United Kingdom,
   at the home of a friend of Mr Bryde.

   4 Under Danish law, Centros, as a `private limited company', is regarded as a foreign limited
   liability company. The rules governing the registration of branches (`filialer') of such
   companies are laid down by the Anpartsselskabslov (Law on private limited companies).

   5 In particular, Article 117 of the Law provides:

   `1. Private limited companies and foreign companies having a similar legal form which are
   established in one Member State of the European Communities may do business in Denmark through
   a branch.'$

   6 During the summer of 1992, Mrs Bryde requested the Board to register a branch of Centros in
   Denmark.

   7 The Board refused that registration on the grounds, inter alia, that Centros, which does not
   trade in the United Kingdom, was in fact seeking to establish in Denmark, not a branch, but a
   principal establishment, by circumventing the national rules concerning, in particular, the
   paying-up of minimum capital fixed at DKK 200 000 by Law No 886 of 21 December 1991.

   8 Centros brought an action before the O/stre Landsret against the refusal of the Board to
   effect that registration.

   9 The O/stre Landsret upheld the arguments of the Board in a judgment of 8 September 1995,
   whereupon Centros appealed to the Ho/jesteret.

   10 In those proceedings, Centros maintains that it satisfies the conditions imposed by the law
   on private limited companies relating to the registration of a branch of a foreign company.
   Since it was lawfully formed in the United Kingdom, it is entitled to set up a branch in
   Denmark pursuant to Article 52, read in conjunction with Article 58, of the Treaty.

   11 According to Centros the fact that it has never traded since its formation in the United
   Kingdom has no bearing on its right to freedom of establishment. In its judgment in Case 79/85
   Segers v Bedrijfsvereniging voor Bank- en Verzekeringswegen, Groothandel en Vrije Beroepen
   [1986] ECR 2375, the Court ruled that Articles 52 and 58 of the Treaty prohibited the
   competent authorities of a Member State from excluding the director of a company from a
   national sickness insurance scheme solely on the ground that the company had its registered
   office in another Member State, even though it did not conduct any business there.

   12 The Board submits that its refusal to grant registration is not contrary to Articles 52 and
   58 of the Treaty since the establishment of a branch in Denmark would seem to be a way of
   avoiding the national rules on the provision for and the paying-up of minimum share capital.
   Furthermore, its refusal to register is justified by the need to protect private or public
   creditors and other contracting parties and also by the need to endeavour to prevent
   fraudulent insolvencies.

   13 In those circumstances, the Ho/jesteret has decided to stay proceedings and to refer the
   following question to the Court for a preliminary ruling:

   `Is it compatible with Article 52 of the EC Treaty, in conjunction with Articles 56 and 58
   thereof, to refuse registration of a branch of a company which has its registered office in
   another Member State and has been lawfully founded with company capital of GBP 100
   (approximately DKK 1 000) and exists in conformity with the legislation of that Member State,
   where the company does not itself carry on any business but it is desired to set up the branch
   in order to carry on the entire business in the country in which the branch is established,
   and where, instead of incorporating a company in the latter Member State, that procedure must
   be regarded as having been employed in order to avoid paying up company capital of not less
   than DKK 200 000 (at present DKR 125 000)?'

   14 By its question, the national court is in substance asking whether it is contrary to
   Articles 52 and 58 of the Treaty for a Member State to refuse to register a branch of a
   company formed in accordance with the legislation of another Member State in which it has its
   registered office but where it does not carry on any business when the purpose of the branch
   is to enable the company concerned to carry on its entire business in the State in which that
   branch is to be set up, while avoiding the formation of a company in that State, thus evading
   application of the rules governing the formation of companies which are, in that State, more
   restrictive so far as minimum paid-up share capital is concerned.

   15 As a preliminary point, it should be made clear that the Board does not in any way deny
   that a joint stock or private limited company with its registered office in another Member
   State may carry on business in Denmark through a branch. It therefore agrees, as a general
   rule, to register in Denmark a branch of a company formed in accordance with the law of
   another Member State. In particular, it has added that, if Centros had conducted any business
   in England and Wales, the Board would have agreed to register its branch in Denmark.

   16 According to the Danish Government, Article 52 of the Treaty is not applicable in the case
   in the main proceedings, since the situation is purely internal to Denmark. Mr and Mrs Bryde,
   Danish nationals, have formed a company in the United Kingdom which does not carry on any
   actual business there with the sole purpose of carrying on business in Denmark through a
   branch and thus of avoiding application of Danish legislation on the formation of private
   limited companies. It considers that in such circumstances the formation by nationals of one
   Member State of a company in another Member State does not amount to a relevant external
   element in the light of Community law and, in particular, freedom of establishment.

   17 In this respect, it should be noted that a situation in which a company formed in
   accordance with the law of a Member State in which it has its registered office desires to set
   up a branch in another Member State falls within the scope of Community law. In that regard,
   it is immaterial that the company was formed in the first Member State only for the purpose of
   establishing itself in the second, where its main, or indeed entire, business is to be
   conducted (see, to this effect, Segers paragraph 16).

   18 That Mrs and Mrs Bryde formed the company Centros in the United Kingdom for the purpose of
   avoiding Danish legislation requiring that a minimum amount of share capital be paid up has
   not been denied either in the written observations or at the hearing. That does not, however,
   mean that the formation by that British company of a branch in Denmark is not covered by
   freedom of establishment for the purposes of Article 52 and 58 of the Treaty. The question of
   the application of those articles of the Treaty is different from the question whether or not
   a Member State may adopt measures in order to prevent attempts by certain of its nationals to
   evade domestic legislation by having recourse to the possibilities offered by the Treaty.

   19 As to the question whether, as Mr and Mrs Bryde claim, the refusal to register in Denmark a
   branch of their company formed in accordance with the law of another Member State in which its
   has its registered office constitutes an obstacle to freedom of establishment, it must be
   borne in mind that that freedom, conferred by Article 52 of the Treaty on Community nationals,
   includes the right for them to take up and pursue activities as self-employed persons and to
   set up and manage undertakings under the same conditions as are laid down by the law of the
   Member State of establishment for its own nationals. Furthermore, under Article 58 of the
   Treaty companies or firms formed in accordance with the law of a Member State and having their
   registered office, central administration or principal place of business within the Community
   are to be treated in the same way as natural persons who are nationals of Member States.

   20 The immediate consequence of this is that those companies are entitled to carry on their
   business in another Member State through an agency, branch or subsidiary. The location of
   their registered office, central administration or principal place of business serves as the
   connecting factor with the legal system of a particular State in the same way as does
   nationality in the case of a natural person (see, to that effect, Segers, paragraph 13, Case
   270/83 Commission v France [1986] ECR 273, paragraph 18, Case C-330/91 Commerzbank [1993] ECR
   I-4017, paragraph 13, and Case C-264/96 ICI [1998] I-4695, paragraph 20).

   21 Where it is the practice of a Member State, in certain circumstances, to refuse to register
   a branch of a company having its registered office in another Member State, the result is that
   companies formed in accordance with the law of that other Member State are prevented from
   exercising the freedom of establishment conferred on them by Articles 52 and 58 of the Treaty.

   22 Consequently, that practice constitutes an obstacle to the exercise of the freedoms
   guaranteed by those provisions.

   23 According to the Danish authorities, however, Mr and Mrs Bryde cannot rely on those
   provisions, since the sole purpose of the company formation which they have in mind is to
   circumvent the application of the national law governing formation of private limited
   companies and therefore constitutes abuse of the freedom of establishment. In their
   submission, the Kingdom of Denmark is therefore entitled to take steps to prevent such abuse
   by refusing to register the branch.

   24 It is true that according to the case-law of the Court a Member State is entitled to take
   measures designed to prevent certain of its nationals from attempting, under cover of the
   rights created by the Treaty, improperly to circumvent their national legislation or to
   prevent individuals from improperly or fraudulently taking advantage of provisions of
   Community law.

   25 However, although, in such circumstances, the national courts may, case by case, take
   account - on the basis of objective evidence - of abuse or fraudulent conduct on the part of
   the persons concerned in order, where appropriate, to deny them the benefit of the provisions
   of Community law on which they seek to rely, they must nevertheless assess such conduct in the
   light of the objectives pursued by those provisions (Paletta II, paragraph 25).

   26 In the present case, the provisions of national law, application of which the parties
   concerned have sought to avoid, are rules governing the formation of companies and not rules
   concerning the carrying on of certain trades, professions or businesses. The provisions of the
   Treaty on freedom of establishment are intended specifically to enable companies formed in
   accordance with the law of a Member State and having their registered office, central
   administration or principal place of business within the Community to pursue activities in
   other Member States through an agency, branch or subsidiary.

   27 That being so, the fact that a national of a Member State who wishes to set up a company
   chooses to form it in the Member State whose rules of company law seem to him the least
   restrictive and to set up branches in other Member States cannot, in itself, constitute an
   abuse of the right of establishment. The right to form a company in accordance with the law of
   a Member State and to set up branches in other Member States is inherent in the exercise, in a
   single market, of the freedom of establishment guaranteed by the Treaty.

   28 In this connection, the fact that company law is not completely harmonised in the Community
   is of little consequence. Moreover, it is always open to the Council, on the basis of the
   powers conferred upon it by Article 54(3)(g) of the EC Treaty, to achieve complete
   harmonisation.

   29 In addition, it is clear from paragraph 16 of Segers that the fact that a company does not
   conduct any business in the Member State in which it has its registered office and pursues its
   activities only in the Member State where its branch is established is not sufficient to prove
   the existence of abuse or fraudulent conduct which would entitle the latter Member State to
   deny that company the benefit of the provisions of Community law relating to the right of
   establishment.

   30 Accordingly, the refusal of a Member State to register a branch of a company formed in
   accordance with the law of another Member State in which it has its registered office on the
   grounds that the branch is intended to enable the company to carry on all its economic
   activity in the host State, with the result that the secondary establishment escapes national
   rules on the provision for and the paying-up of a minimum capital, is incompatible with
   Articles 52 and 58 of the Treaty, in so far as it prevents any exercise of the right freely to
   set up a secondary establishment which Articles 52 and 58 are specifically intended to
   guarantee.

   31 The final question to be considered is whether the national practice in question might not
   be justified for the reasons put forward by the Danish authorities.

   32 Referring both to Article 56 of the Treaty and to the case-law of the Court on imperative
   requirements in the general interest, the Board argues that the requirement that private
   limited companies provide for and pay up a minimum share capital pursues a dual objective:
   first, to reinforce the financial soundness of those companies in order to protect public
   creditors against the risk of seeing the public debts owing to them become irrecoverable
   since, unlike private creditors, they cannot secure those debts by means of guarantees and,
   second, and more generally, to protect all creditors, whether public or private, by
   anticipating the risk of fraudulent bankruptcy due to the insolvency of companies whose
   initial capitalisation was inadequate.

   33 The Board adds that there is no less restrictive means of attaining this dual objective.
   The other way of protecting creditors, namely by introducing rules making it possible for
   shareholders to incur personal liability, under certain conditions, would be more restrictive
   than the requirement to provide for and pay up a minimum share capital.

   34 It should be observed, first, that the reasons put forward do not fall within the ambit of
   Article 56 of the Treaty. Next, it should be borne in mind that, according to the Court's
   case-law, national measures liable to hinder or make less attractive the exercise of
   fundamental freedoms guaranteed by the Treaty must fulfil four conditions: they must be
   applied in a non-discriminatory manner; they must be justified by imperative requirements in
   the general interest; they must be suitable for securing the attainment of the objective which
   they pursue; and they must not go beyond what is necessary in order to attain it (see Case
   C-19/92 Kraus v Land Baden-Württemberg [1993] ECR I-1663, paragraph 32, and Case C-55/94
   Gebhard v Consiglio dell'Ordine degli Avvocati e Procuratori di Milano [1995] ECR I-4165,
   paragraph 37).

   35 Those conditions are not fulfilled in the case in the main proceedings. First, the practice
   in question is not such as to attain the objective of protecting creditors which it purports
   to pursue since, if the company concerned had conducted business in the United Kingdom, its
   branch would have been registered in Denmark, even though Danish creditors might have been
   equally exposed to risk.

   36 Since the company concerned in the main proceedings holds itself out as a company governed
   by the law of England and Wales and not as a company governed by Danish law, its creditors are
   on notice that it is covered by laws different from those which govern the formation of
   private limited companies in Denmark and they can refer to certain rules of Community law
   which protect them, such as the Fourth Council Directive 78/660/EEC of 25 July 1978 based on
   Article 54(3)(g) of the Treaty on the annual accounts of certain types of companies (OJ 1978 L
   222, p. 11), and the Eleventh Council Directive 89/666/EEC of 21 December 1989 concerning
   disclosure requirements in respect of branches opened in a Member State by certain types of
   company governed by the law of another State (OJ 1989 L 395, p. 36).

   37 Second, contrary to the arguments of the Danish authorities, it is possible to adopt
   measures which are less restrictive, or which interfere less with fundamental freedoms, by,
   for example, making it possible in law for public creditors to obtain the necessary
   guarantees.

   38 Lastly, the fact that a Member State may not refuse to register a branch of a company
   formed in accordance with the law of another Member State in which it has its registered
   office does not preclude that first State from adopting any appropriate measure for preventing
   or penalising fraud, either in relation to the company itself, if need be in cooperation with
   the Member State in which it was formed, or in relation to its members, where it has been
   established that they are in fact attempting, by means of the formation of the company, to
   evade their obligations towards private or public creditors established on the territory of a
   Member State concerned. In any event, combating fraud cannot justify a practice of refusing to
   register a branch of a company which has its registered office in another Member State.

   39 The answer to the question referred must therefore be that it is contrary to Articles 52
   and 58 of the Treaty for a Member State to refuse to register a branch of a company formed in
   accordance with the law of another Member State in which it has its registered office but in
   which it conducts no business where the branch is intended to enable the company in question
   to carry on its entire business in the State in which that branch is to be created, while
   avoiding the need to form a company there, thus evading application of the rules governing the
   formation of companies which, in that State, are more restrictive as regards the paying up of
   a minimum share capital. That interpretation does not, however, prevent the authorities of the
   Member State concerned from adopting any appropriate measure for preventing or penalising
   fraud, either in relation to the company itself, if need be in cooperation with the Member
   State in which it was formed, or in relation to its members, where it has been established
   that they are in fact attempting, by means of the formation of a company, to evade their

Operative part

   On those grounds,

   THE COURT,

   in answer to the question referred to it by the Ho/jesteret by order of 3 June 1997, hereby
   rules:

   It is contrary to Articles 52 and 58 of the EC Treaty for a Member State to refuse to register
   a branch of a company formed in accordance with the law of another Member State in which it
   has its registered office but in which it conducts no business where the branch is intended to
   enable the company in question to carry on its entire business in the State in which that
   branch is to be created, while avoiding the need to form a company there, thus evading
   application of the rules governing the formation of companies which, in that State, are more
   restrictive as regards the paying up of a minimum share capital. That interpretation does not,
   however, prevent the authorities of the Member State concerned from adopting any appropriate
   measure for preventing or penalising fraud, either in relation to the company itself, if need
   be in cooperation with the Member State in which it was formed, or in relation to its members,
   where it has been established that they are in fact attempting, by means of the formation of a
   company, to evade their obligations towards private or public creditors established in the
   territory of the Member State concerned.

   

   JUDGMENT OF THE COURT

   In Case C-167/01,

   Kamer van Koophandel en Fabrieken voor Amsterdam

   and

   Inspire Art Ltd,

   on the interpretation of Articles 43 EC, 46 EC and 48 EC,

   1.

   By order of 5 February 2001, received at the Court on 19 April 2001, the Kantongerecht te
   Amsterdam (Amsterdam Cantonal Court) referred to the Court for a preliminary ruling under
   Article 234 EC two questions on the interpretation of Articles 43 EC, 46 EC and 48 EC.

   2.

   Those questions were raised in proceedings between the Kamer van Koophandel en Fabrieken voor
   Amsterdam (Amsterdam Chamber of Commerce and Industry), Netherlands (the Chamber of Commerce)
   and Inspire Art Ltd, a company governed by the law of England and Wales (Inspire Art),
   concerning the obligation imposed on Inspire Art's branch in the Netherlands to record, with
   its registration in the Dutch commercial register, its description as a formeel buitenlandse
   vennootschap (formally foreign company) and to use that description in its business dealings,
   such obligations being imposed by the Wet op de Formeel Buitenlandse Vennootschappen (Law on
   Formally Foreign Companies) of 17 December 1997 (Staatsblad 1997 No 697, the WFBV).

   I - The legal framework

   The relevant provisions of Community law

   3.

   The first paragraph of Article 43 EC provides:

   Within the framework of the provisions set out below, restrictions on the freedom of
   establishment of nationals of a Member State in the territory of another Member State shall be
   prohibited. Such prohibition shall also apply to restrictions on the setting-up of agencies,
   branches or subsidiaries by nationals of any Member State established in the territory of any
   Member State.

   4.

   Article 48 EC extends entitlement to freedom of establishment, subject to the same conditions
   as those laid down for individuals who are nationals of the Member States, to companies or
   firms formed in accordance with the law of a Member State and having their registered office,
   central administration or principal place of business within the Community.

   5.

   Article 46 EC permits the Member States to restrict the freedom of establishment of foreign
   nationals by adopting provisions laid down by law, regulation or administrative action, in so
   far as such provisions are justified on grounds of public policy, public security or public
   health.

   6.

   Article 44(2)(g) EC empowers the Council of the European Union, for the purpose of giving
   effect to freedom of establishment, to coordinate to the necessary extent the safeguards
   which, for the protection of the interests of members and others, are required by Member
   States of companies or firms within the meaning of the second paragraph of Article 48 of the
   EC Treaty with a view to making such safeguards equivalent throughout the Community.

   7.

   Various directives have in that manner been adopted by the Council on that basis (company-law
   directives) and, in particular, the following directives referred to in the dispute in the
   main proceedings.

   ...

   

   The relevant provisions of national law

   22.

   Article 1 of the WFBV defines a formally foreign company as a capital company formed under
   laws other than those of the Netherlands and having legal personality, which carries on its
   activities entirely or almost entirely in the Netherlands and also does not have any real
   connection with the State within which the law under which the company was formed applies ....

   23.

   Articles 2 to 5 of the WFBV impose on formally foreign companies various obligations
   concerning the company's registration in the commercial register, an indication of that status
   in all the documents produced by it, the minimum share capital and the drawing-up, production
   and publication of the annual documents. The WFBV also provides for penalties in case of
   non-compliance with those provisions.

   24.

   In particular, Article 2 of the WFBV requires a company falling within the definition of a
   formally foreign company to be registered as such in the commercial register of the host
   State. An authentic copy in Dutch, French, German or English, or a copy certified by a
   director, of the instrument constituting the company must also be filed in the commercial
   register of the host State, and a copy of the memorandum and articles of association if they
   are contained in a separate instrument. The date of the first registration of that company,
   the national register in which and the number under which it is registered must also appear in
   the commercial register and, in the case of companies with a single member, certain
   information concerning that sole shareholder.

   25.

   Article 4(4) provides for directors to be jointly and severally liable with the company for
   legal acts carried out in the name of the company during their directorship until the
   requirement of registration in the commercial register has been fulfilled.

   26.

   Pursuant to Article 3 of the WFBV, all documents and notices in which a formally foreign
   company appears or which it produces, except telegrams and advertisements, must state the
   company's full name, legal form, registered office and chief place of business, and the
   registration number, the date of first registration and the register in which it is required
   to be registered under the legislation applicable to it. That article also requires it to be
   indicated that the company is formally foreign and prohibits the making of statements in
   documents or publications which give the false impression that the undertaking belongs to a
   Netherlands legal person.

   27.

   Pursuant to Article 4(1) of the WFBV, the subscribed capital of a formally foreign company
   must be at least equal to the minimum amount required of Netherlands limited companies by
   Article 2:178 of the Burgerlijke Wetboek (Netherlands Civil Code, the BW), which was EUR 18
   000 on 1 September 2000 (Staatsblad 2000, N 322). The paid-up share capital must be at least
   equal to the minimum capital (Article 4(2) of the WFBV, referring back to Article 2:178 of the
   BW). In order to ensure that formally foreign companies fulfil those conditions, an auditor's
   certificate must be filed in the commercial register (Article 4(3) of the WFBV).

   28.

   Until the conditions relating to capital and paid-up share capital have been satisfied, the
   directors are jointly and severally liable with the company for all legal acts carried out
   during their directorship which are binding on the company. The directors of a formally
   foreign company are likewise jointly and severally responsible for the company's acts if the
   capital subscribed and paid up falls below the minimum required, having originally satisfied
   the minimum capital requirement. The directors' joint and several liability lasts only so long
   as the company's status is that of a formally foreign company (Article 4(4) of the WFBV).

   29.

   Nevertheless, Article 4(5) of the WFBV states that the minimum capital provisions do not apply
   to a company governed by the law of a Member State or of a Member State of the European
   Economic Area (the E.E.A.) to which the Second Directive is applicable.

   30.

   Article 5(1) and (2) of the WFBV requires the directors of formally foreign companies to keep
   accounts and hold them for seven years. Directors must produce annual accounts and an annual
   report. Those documents must be published by being lodged in the commercial register and must
   satisfy the conditions laid down in Title 9 of Book 2 of the BW, which makes it possible to be
   sure that they are consistent with the annual documents produced by Netherlands companies.

   II - The dispute in the main proceedings and the questions referred for a preliminary ruling

   34.

   Inspire Art was formed on 28 July 2000 in the legal form of a private company limited by
   shares under the law of England and Wales and it has its registered office at Folkestone
   (United Kingdom). Its sole director, whose domicile is in The Hague (Netherlands), is
   authorised to act alone and independently in the name of the company. The company, which
   carries on activity under the business name Inspire Art Ltd in the sphere of dealing in objets
   d'art, began trading on 17 August 2000 and has a branch in Amsterdam.

   35.

   Inspire Art is registered in the commercial register of the Chamber of Commerce without any
   indication of the fact that it is a formally foreign company within the meaning of Article 1
   of the WFBV.

   36.

   Taking the view that that indication was mandatory on the ground that Inspire Art traded
   exclusively in the Netherlands, the Chamber of Commerce applied to the Kantongerecht te
   Amsterdam on 30 October 2000 for an order that there should be added to that company's
   registration in the commercial register the statement that it is a formally foreign company,
   in accordance with Article 1 of the WFBV, which would entail other obligations laid down by
   law, set out in paragraphs 22 to 33 above.

   37.

   Inspire Art denies that its registration is incomplete, primarily because the company does not
   meet the conditions set out in Article 1 of the WFBV. As a secondary point, if the
   Kantongerecht were to decide that it met those conditions, it maintained that the WFBV was
   contrary to Community law, and to Articles 43 EC and 48 EC in particular.

   38.

   In its order of 5 February 2001 the Kantongerecht held that Inspire Art was a formally foreign
   company within the meaning of Article 1 of the WFBV.

   39.

   As regards the compatibility of the WFBV with Community law, it decided to stay proceedings
   and refer the following questions to the Court of Justice for a preliminary ruling:

   1. Are Articles 43 EC and 48 EC to be interpreted as precluding the Netherlands, pursuant to
   the Wet op de formeel buitenlandse vennootschappen of 17 December 1997, from attaching
   additional conditions, such as those laid down in Articles 2 to 5 of that law, to the
   establishment in the Netherlands of a branch of a company which has been set up in the United
   Kingdom with the sole aim of securing the advantages which that offers compared to
   incorporation under Netherlands law, given that Netherlands law imposes stricter rules than
   those applying in the United Kingdom with regard to the setting-up of companies and payment
   for shares, and given that the Netherlands law infers that aim from the fact that the company
   carries on its activities entirely or almost entirely in the Netherlands and, furthermore,
   does not have any real connection with the State in which the law under which it was formed
   applies?

   2. If, on a proper construction of those articles, it is held that the provisions of the Wet
   op de formeel buitenlandse vennootschappen are incompatible with them, must Article 46 EC be
   interpreted as meaning that the said Articles 43 EC and 48 EC do not affect the applicability
   of the Netherlands rules laid down in that law, on the ground that the provisions in question
   are justified for the reasons stated by the Netherlands legislature?

   III - Preliminary observations

   40.

   The Chamber of Commerce, the Netherlands Government and the Commission of the European
   Communities are of the view that the questions were too broadly framed by the national court.
   Since the dispute in the main proceedings concerned only the registration of a company in the
   commercial register, the Court must confine its analysis exclusively to the provisions of
   national law relating to that point.

   ...

   42.

   In this connection, settled case-law makes it clear that the procedure provided for by Article
   234 EC is an instrument for cooperation between the Court of Justice and the national courts
   (see, inter alia, Case C-343/90 Lourenço Dias [1992] ECR I-4673, paragraph 14).

   43.

   In the context of that cooperation, the national court before which the dispute has been
   brought, which alone has direct knowledge of the facts of the case in the main proceedings and
   must assume responsibility for the subsequent judicial decision, is in the best position to
   determine, in the light of the particular circumstances of the case, both the need for a
   preliminary ruling in order to enable it to deliver judgment and the relevance of the
   questions which it submits to the Court (Lourenço Dias, cited above, paragraph 15, and Case
   C-390/99 Canal Satélite Digital [2002] ECR I-607, paragraph 18).

   44.

   Consequently, where the question submitted by the national court concerns the interpretation
   of Community law, the Court of Justice is, in principle, bound to give a ruling (Lourenço
   Dias, paragraph 16; Case C-415/93 Bosman [1995] ECR I-4921, paragraph 59; Case C-379/98
   PreussenElektra [2001] ECR I-2099, paragraph 38, and Canal Satélite Digital, cited above,
   paragraph 18).

   45.

   It is nevertheless equally settled case-law that the Court considers that it may, if need be,
   examine the circumstances in which the case was referred to it by the national court, in order
   to assess whether it has jurisdiction (Case 244/80 Foglia [1981] ECR 3045, paragraph 21, and
   Canal Satélite Digital, paragraph 19). The spirit of cooperation which must prevail in
   preliminary ruling proceedings requires the national court for its part to have regard to the
   function entrusted to the Court of Justice, which is to contribute to the administration of
   justice in the Member States and not to give opinions on general or hypothetical questions
   (see, inter alia, Foglia, cited above, paragraphs 18 and 20; Lourenço Dias, paragraph 17;
   Bosman, cited above, paragraph 60, and Case C-451/99 Cura Anlagen [2002] ECR I-3193, paragraph
   26).

   46.

   Moreover, in order to enable the Court to give a useful interpretation of Community law, it is
   essential for the national court to explain why it considers that an answer to its questions
   is necessary for resolving the dispute (see, inter alia, Foglia, paragraph 17).

   47.

   With that information in its possession, the Court will then be in a position to ascertain
   whether the interpretation of Community law which is sought is related to the actual nature
   and subject-matter of the main proceedings. If it should appear that the question raised is
   manifestly irrelevant for the purposes of deciding the case, the Court must declare that there
   is no need to proceed to judgment (Lourenço Dias, paragraph 20).

   48.

   Having regard to the foregoing, the Court must consider whether the questions referred by the
   national court in this case are relevant to resolution of the dispute.

   49.

   Although the issue at the heart of the dispute in the main proceedings is whether or not
   Inspire Art must be registered as a formally foreign company in the business register, the
   fact remains that that registration automatically and inextricably entails a number of legal
   consequences provided for by Articles 2 to 5 of the WFBV.

   50.

   The national court has thus considered that the question of compatibility with Articles 43 EC,
   46 EC and 48 EC arose more particularly in respect of certain of the obligations provided for
   by Articles 2 to 5 of the WFBV, namely, those relating to registration as a formally foreign
   company, the indication of that status in all documents produced by the company, the minimum
   capital required and the personal liability of the directors as joint and several debtors when
   the company's share capital has never reached or has fallen below the minimum amount of
   capital required by law.

   51.

   In order to provide the national court with a helpful answer, within the meaning of the
   case-law referred to above, it is in consequence necessary to examine all those provisions,
   having regard to freedom of establishment as guaranteed by the EC Treaty, and also to the
   company-law directives.

   Consideration of the questions referred

   52.

   By those questions, which may appropriately be considered together, the national court seeks
   in substance to ascertain:

   - whether Articles 43 EC and 48 EC must be interpreted as precluding legislation of a Member
   State, such as the WFBV, which attaches additional conditions, such as those laid down in
   Articles 2 to 5 of that law, to the establishment in that Member State of a company formed
   under the law of another Member State with the sole aim of securing certain advantages
   compared with companies formed under the law of the Member State of establishment which
   imposes stricter rules than those imposed by the law of the Member State of formation with
   regard to the setting-up of companies and paying-up of shares;

   - whether the fact that the law of the Member State of establishment infers that aim from the
   circumstance of that company's carrying on its activities entirely or almost entirely in that
   latter Member State and of its having no genuine connection with the State in accordance with
   the law of which it was formed makes any difference to the Court's analysis of that question;

   - and whether, if an affirmative answer is given to one or other of those questions, a
   national law such as the WFBV may be justified under Article 46 EC or by overriding reasons
   relating to the public interest.

   53.

   In the first place, Article 5(1) and (2) of the WFBV, mentioned in the questions referred for
   a preliminary ruling, concerns the keeping and filing of the annual accounts of formally
   foreign companies. Article 5(3) of the WFBV provides, however, that the obligations laid down
   in those subparagraphs are not to apply to companies governed by the law of another Member
   State and to which the Fourth Directive, inter alia, applies. Inspire Art is covered by that
   exception, since it is governed by the law of England and Wales and since it falls within the
   scope ratione personae of the Fourth Directive.

   54.

   There is therefore no longer any need for the Court to consider whether a provision such as
   Article 5 of the WFBV is compatible with Community law.

   55.

   Secondly, several of the provisions of the WFBV fall within the scope of the Eleventh
   Directive, since that concerns disclosure requirements in respect of branches opened in a
   Member State by companies covered by the First Directive and governed by the law of another
   Member State.

   56.

   In that connection, first, as the Commission observes, some of the obligations imposed by the
   WFBV concern the implementation in domestic law of the disclosure requirements laid down by
   the Eleventh Directive.

   57.

   Those are, more specifically, the provisions requiring: an entry in the business register of
   the host Member State showing registration in a foreign business register, and the number
   under which the company is registered in that register (Article 2(1) of the WFBV and Article
   2(1)(c) of the Eleventh Directive), filing in the Netherlands business register of a certified
   copy of the document creating the company and of its memorandum and articles of association in
   Dutch, French, English or German (Article 2(1) of the WFBV and Articles 2(2)(b) and 4 of the
   Eleventh Directive), and the filing every year in that business register of a certificate of
   registration in the foreign business register (Article 5(4) of the WFBV and Article 2(2)(c) of
   the Eleventh Directive).

   58.

   Those provisions, the compatibility of which with the Eleventh Directive has not been called
   into question, cannot be regarded as constituting any impediment to freedom of establishment.

   59.

   Nevertheless, even if the various disclosure measures referred to at paragraph 57 above are
   compatible with Community law, that does not automatically mean that the sanctions attached by
   the WFBV to non-compliance with those disclosure measures must also be compatible with
   Community law.

   60.

   Article 4(4) of the WFBV provides for directors to be jointly and severally liable with the
   company for legal acts adopted in the name of the company during their directorship for so
   long as the requirements concerning disclosure in the business register have not been met.

   61.

   It is true that Article 12 of the Eleventh Directive requires the Member States to provide for
   appropriate penalties where branches of companies fail to make the required disclosures in the
   host Member State.

   62.

   The Court has consistently held that where a Community regulation does not specifically
   provide any penalty for an infringement or refers for that purpose to national laws,
   regulations and administrative provisions, Article 10 EC requires the Member States to take
   all measures necessary to guarantee the application and effectiveness of Community law. For
   that purpose, while the choice of penalties remains within their discretion, they must ensure
   in particular that infringements of Community law are penalised in conditions, both procedural
   and substantive, which are analogous to those applicable to infringements of national law of a
   similar nature and importance and which, in any event, make the penalty effective,
   proportionate and dissuasive (Case 68/88 Commission v Greece [1989] ECR 2965, paragraphs 23
   and 24; Case C-326/88 Hansen [1990] ECR I-2911, paragraph 17; Case C-36/94 Siesse [1995] ECR
   I-3573, paragraph 20, and Case C-177/95 Ebony Maritime and Loten Navigation [1997] ECR I-1111,
   paragraph 35).

   63.

   It is for the national court, which alone has jurisdiction to interpret domestic law, to
   establish whether the penalty provided for by Article 4(4) of the WFBV satisfies those
   conditions and, in particular, whether it does not put formally foreign companies at a
   disadvantage in comparison with Netherlands companies where there is an infringement of the
   disclosure requirements referred to in paragraph 56 above.

   64.

   If the national court reaches the conclusion that Article 4(4) of the WFBV treats formally
   foreign companies differently from national companies, it must be concluded that that
   provision is contrary to Community law.

   65.

   On the other hand, the list set out in Article 2 of the Eleventh Directive does not include
   the other disclosure obligations provided for by the WFBV, namely, recording in the commercial
   register the fact that the company is formally foreign (Articles 1 and 2(1) of the WFBV),
   recording in the business register of the host Member State the date of first registration in
   the foreign business register and information relating to sole members (Article 2(1) of the
   WFBV), and the compulsory filing of an auditor's certificate to the effect that the company
   satisfies the conditions as to minimum capital, subscribed capital and paid-up share capital
   (Article 4(3) of the WFBV). Similarly, mention of the company's status of a formally foreign
   company on all documents it produces (Article 3 of the WFBV) is not included in Article 6 of
   the Eleventh Directive.

   66.

   It is therefore necessary to consider, with regard to those obligations, whether the
   harmonisation brought about by the Eleventh Directive, and more particularly Articles 2 and 6
   thereof, is exhaustive.

   67.

   The Eleventh Directive was adopted on the basis of Article 54(3)(g) of the EC Treaty (now,
   after amendment, Article 44(2)(g) EC) which provides that the Council and Commission are to
   carry out the duties devolving on them under that article by coordinating to the necessary
   extent the safeguards which, for the protection of the interests of members and others, are
   required by Member States of companies or firms within the meaning of the second paragraph of
   Article 58 with a view to making such safeguards equivalent throughout the Community.

   68.

   Furthermore, it follows from the fourth and fifth recitals in the preamble to the Directive
   that the differences in respect of branches between the laws of the Member States, especially
   as regards disclosure, may interfere with the exercise of the right of establishment and must
   therefore be eliminated.

   69.

   It follows that, without affecting the information obligations imposed on branches under
   social or tax law, or in the field of statistics, harmonisation of the disclosure to be made
   by branches, as brought about by the Eleventh Directive, is exhaustive, for only in that case
   can it attain the objective it pursues.

   70.

   It must likewise be pointed out that Article 2(1) of the Eleventh Directive is exhaustive in
   formulation. Moreover, Article 2(2) contains a list of optional measures imposing disclosure
   requirements on branches, a measure which can have no raison d'etre unless the Member States
   are unable to provide for disclosure measures for branches other than those laid down in the
   text of that directive.

   ...

   72.

   It must therefore be concluded on this point that it is contrary to Article 2 of the Eleventh
   Directive for national legislation such as the WFBV to impose on the branch of a company
   formed in accordance with the laws of another Member State disclosure obligations not provided
   for by that directive.

   73.

   Thirdly, several of the provisions of the WFBV do not fall within the scope of the Eleventh
   Directive. Those are the rules relating to the minimum capital required, both at the time of
   registration and for so long as a formally foreign company exists, and those relating to the
   penalty attaching to non-compliance with the obligations laid down by the WFBV, namely, the
   joint and several liability of the directors with the company (Article 4(1) and (2) of the
   WFBV). Those provisions must therefore be considered in the light of Articles 43 EC and 48 EC.

   The existence of an impediment to freedom of establishment

   Observations submitted to the Court

   74.

   The Chamber of Commerce and the Netherlands, German, Italian and Austrian Governments are of
   the view that application of provisions such as those of the WFBV is not contrary to Articles
   43 EC and 48 EC.

   75.

   In the first place, the rules laid down by the WFBV concern neither the formation of companies
   under the law of another Member State nor their registration (and consequently their
   recognition). The validity of those companies is in fact recognised and they are not refused
   registration, with the result that freedom of establishment is not compromised.

   76.

   They submit that the considerations of the Court in Case C-212/97 Centros [1999] ECR I-1459
   are therefore irrelevant to the present case, because the latter is concerned solely with the
   rule governing registration of foreign companies without affecting the Member States' freedom
   to lay down conditions for the carrying on of certain trades, professions or businesses.

   77.

   The Netherlands Government maintains that for companies formed under the law of another Member
   State and intending to carry on their activities in the Netherlands, the system of
   incorporation applied in the Netherlands is extremely liberal. In accordance with that
   principle, as formulated in Article 2 of the Wet conflictenrecht corporaties (the Law
   concerning the rules on conflict of laws applicable to legal persons) of 17 December 1997 (the
   rules-of-conflict Law), a company which, by virtue of its contract or instrument of
   incorporation, has, at the time of its formation, its registered office or, failing that, the
   centre of its external operations in the State under the law of which it was formed, shall be
   governed by the law of that State.

   78.

   The Netherlands Government submits that the existence of companies validly formed under the
   law of another Member State is recognised without further formality in the Netherlands. Those
   companies are subject to the law of the State of formation; it is as a rule important that
   those companies should carry on some activity in that State.

   79.

   It has however become apparent that that very accommodating system has in practice led to
   increased use of foreign companies for ends which the Netherlands legislature had not covered
   or even foreseen. More and more frequently companies that carry on their activity principally
   or even exclusively on the Netherlands market are formed abroad with the aim of evading the
   overriding requirements of Netherlands company law.

   80.

   In order to tackle that development, Article 6 of the rules-of-conflict Law has established a
   limited exception to that liberal regime, by providing that this law is without prejudice to
   the provisions of the [WFBV].

   81.

   Next, the Chamber of Commerce and the Netherlands, German, Italian and Austrian Governments
   observe that the provisions of the WFBV do not concern freedom of establishment but are
   confined to imposing on companies with share capital formed under a law other than that of the
   Netherlands a limited number of additional obligations relating to the exercise of their
   business activities and the running of the company, with a view to ensuring that others are
   clearly informed that companies such as Inspire Art are formally foreign companies and that
   they are in addition given the same guarantees - by means of the filing of certain documents
   and certificates - when concluding contracts with those companies as they have when concluding
   contracts with Netherlands companies.

   82.

   In their opinion, those conditions are non-discriminatory since they correspond to the
   mandatory rules of Netherlands company law applicable to limited-liability companies formed in
   the Netherlands. Moreover, the purpose of those conditions, which must be satisfied by
   Netherlands companies as well as by formally foreign companies, is to safeguard non-economic
   interests - recognised at Community level - concerning the protection of consumers and
   creditors.

   83.

   Maintaining that the WFBV is applicable under private international law, the Chamber of
   Commerce and the Netherlands, German and Austrian Governments refer to the judgment in Case
   81/87 Daily Mail and General Trust [1988] ECR 5483 and the relevant case-law. In their
   submission, in that case the Court held that Articles 43 EC and 48 EC did not constitute a
   restriction on the powers of the Member States to determine the relevant factor connecting a
   company to their national legal order. They infer from that judgment that those articles do
   not preclude the adoption under private international law of rules applying to companies
   falling in part within the scope of Netherlands law. In that context, the WFBV does no more
   than attach significance to the place in which the company carries on its activities, in
   addition to the connecting factor of the place of incorporation and registration.

   84.

   In addition, the German and Austrian Governments have asserted that as a matter of principle
   the purpose of Articles 43 EC and 48 EC, as regards freedom to set up branches, is to enable
   undertakings carrying on activities in one Member State to achieve growth in another Member
   State, which is not so in the case of brass-plate companies.

   85.

   The German and Austrian Governments question whether, with regard to formally foreign
   companies, branches ought not actually to be regarded as principal establishments and whether
   there ought not to be applied to them the principles of freedom of primary establishment.
   Following the same reasoning, the Italian Government maintains that the fact that a company
   established in one Member State has never carried on any activity in that State means that it
   cannot be considered to be a branch when it carries on activity in another Member State. By
   placing the sole centre of its activities in a State other than that to which it formally
   belongs, such a company must be considered to be primarily established in that first State.

   86.

   Finally, the Netherlands, German and Italian Governments observe that in its case-law the
   Court has recognised that a Member State is entitled to take measures designed to prevent
   certain of its nationals from attempting, under cover of the rights created by the Treaty,
   improperly to circumvent their national legislation or to prevent individuals from improperly
   or fraudulently taking advantage of provisions of Community law (Centros, paragraph 24, and
   the case-law cited therein). Whether or not there is any improper use must be determined
   taking into account, in particular, the objectives pursued by the provisions of Community law
   in question (Case C-206/94 Paletta [1996] ECR I-2357, paragraph 25).

   87.

   Those Governments argue that, according to the judgments in Case 79/85 Segers [1986] ECR 2375,
   paragraph 16, and Centros, paragraph 29, the fact that a company has been formed in one Member
   State but carries on all its activities through its branch established in another Member State
   does not constitute a sufficient reason for denying the persons concerned the right to freedom
   of establishment by pleading abuse, deceit and/or the unacceptable evasion of national laws.

   ...

   89.

   In consequence, where, as in the main proceedings, a company goes beyond merely exercising its
   right to freedom of establishment and where it was formed in another Member State for the
   purpose of circumventing the body of rules applying to the formation and running of companies
   in the Member State in which it carries on all its activities, those Governments maintain that
   the result of allowing that company to rely on freedom of establishment would be an
   unacceptable evasion of national law. Adoption of measures such as those set out in the WFBV
   is therefore justified as Community law now stands.

   90.

   By contrast, in the view of Inspire Art, the United Kingdom Government and the Commission the
   provisions of the WFBV constitute interference with the freedom of establishment guaranteed by
   Articles 43 EC and 48 EC, in that they impose on formally foreign companies obligations which
   render the right of establishment markedly less attractive for those companies. That indeed is
   the stated purpose of those provisions.

   91.

   Inspire Art, the United Kingdom Government and the Commission submit that the rules on freedom
   of establishment are applicable to a situation such as that concerned in the main proceedings.
   Referring to Segers and to Centros, they argue that a company may also rely on freedom of
   establishment where it was formed in one Member State for the sole purpose of being able to
   establish itself in another Member State where it carries on the essential part, or even all,
   of its activities. It is immaterial that the company was formed in the first Member State
   solely in order to avoid the statutory provisions of the second Member State. According to
   that case-law, there is no abuse, merely the exercise of the freedom of establishment
   guaranteed by the Treaty.

   92.

   The United Kingdom Government and the Commission maintain that Article 1 of the WFBV takes
   account of the place where the company's activity is carried on in order to attach to it a
   number of provisions mandatory in the host Member State. Use of actual activity as a
   connecting factor, which does not correspond to any yardstick provided for in Article 48 EC,
   interferes with freedom of establishment inasmuch as it makes the exercise of that freedom
   less attractive to companies formed abroad which intend subsequently to carry on activity in
   the Netherlands, on the ground that other rules have been held to be applicable, in addition
   to those of the State of formation.

   93.

   Inspire Art argues for a similar interpretation of the WFBV. It states that although under the
   national legislation companies are as a rule governed by the law of the State in which they
   were formed, the Netherlands legislature sought to counter the formation, which it regarded as
   improper, of companies under foreign laws with the aim of carrying on activity exclusively or
   principally in the Netherlands by declaring that the provisions of Netherlands company law
   were applicable to those companies. The legislature justified that regime by invoking the
   protection of creditors. It follows that the WFBV cannot be seen as an application of the real
   head office theory according to which a company is governed by the law of the Member State in
   which it has its actual head office.

   94.

   Lastly, the United Kingdom Government notes that it is of fundamental importance to the
   operation of the common market that it should be possible to set up secondary establishments
   in other Member States. It submits that in the circumstances of the case Centros is fully
   applicable.

   The Court's answer

   95.

   The Court has held that it is immaterial, having regard to the application of the rules on
   freedom of establishment, that the company was formed in one Member State only for the purpose
   of establishing itself in a second Member State, where its main, or indeed entire, business is
   to be conducted (Segers, paragraph 16, and Centros, paragraph 17). The reasons for which a
   company chooses to be formed in a particular Member State are, save in the case of fraud,
   irrelevant with regard to application of the rules on freedom of establishment (Centros,
   paragraph 18).

   96.

   The Court has also held that the fact that the company was formed in a particular Member State
   for the sole purpose of enjoying the benefit of more favourable legislation does not
   constitute abuse even if that company conducts its activities entirely or mainly in that
   second State (Segers, paragraph 16, and Centros, paragraph 18).

   97.

   It follows that those companies are entitled to carry on their business in another Member
   State through a branch, and that the location of their registered office, central
   administration or principal place of business serves as the connecting factor with the legal
   system of a particular Member State in the same way as does nationality in the case of a
   natural person (Case 270/83 Commission v France [1986] ECR 273, paragraph 18; Segers,
   paragraph 13, and Centros, paragraph 20.

   98.

   Thus, in the main proceedings, the fact that Inspire Art was formed in the United Kingdom for
   the purpose of circumventing Netherlands company law which lays down stricter rules with
   regard in particular to minimum capital and the paying-up of shares does not mean that that
   company's establishment of a branch in the Netherlands is not covered by freedom of
   establishment as provided for by Articles 43 EC and 48 EC. As the Court held in Centros
   (paragraph 18), the question of the application of those articles is different from the
   question whether or not a Member State may adopt measures in order to prevent attempts by
   certain of its nationals improperly to evade domestic legislation by having recourse to the
   possibilities offered by the Treaty.

   99.

   The argument that freedom of establishment is not in any way infringed by the WFBV inasmuch as
   foreign companies are fully recognised in the Netherlands and are not refused registration in
   that Member State's business register, that law having the effect simply of laying down a
   number of additional obligations classified as administrative, cannot be accepted.

   100.

   The effect of the WFBV is, in fact, that the Netherlands company-law rules on minimum capital
   and directors' liability are applied mandatorily to foreign companies such as Inspire Art when
   they carry on their activities exclusively, or almost exclusively, in the Netherlands.

   101.

   Creation of a branch in the Netherlands by companies of that kind is therefore subject to
   certain rules provided for by that State in respect of the formation of a limited-liability
   company. The legislation at issue in the case in the main proceedings, which requires the
   branch of such a company formed in accordance with the legislation of a Member State to comply
   with the rules of the State of establishment on share capital and directors' liability, has
   the effect of impeding the exercise by those companies of the freedom of establishment
   conferred by the Treaty.

   102.

   The last issue for consideration concerns the arguments based on the judgment in Daily Mail
   and General Trust, namely, that the Member States remain free to determine the law applicable
   to a company since the rules relating to freedom of establishment have not led to
   harmonisation of the provisions of the private international law of the Member States. In this
   respect it is argued that the Member States retain the right to take action against
   brass-plate companies, that classification being in the circumstances of the case inferred
   from the lack of any real connection with the State of formation.

   103.

   It must be stressed that, unlike the case at issue in the main proceedings, Daily Mail and
   General Trust concerned relations between a company and the Member State under the laws of
   which it had been incorporated in a situation where the company wished to transfer its actual
   centre of administration to another Member State whilst retaining its legal personality in the
   State of incorporation. In the main proceedings the national court has asked the Court of
   Justice whether the legislation of the State where a company actually carries on its
   activities applies to that company when it was formed under the law of another Member State
   (Case C-208/00 Überseering [2002] ECR I-9919, paragraph 62).

   104.

   It follows from the foregoing that the provisions of the WFBV relating to minimum capital
   (both at the time of formation and during the life of the company) and to directors' liability
   constitute restrictions on freedom of establishment as guaranteed by Articles 43 EC and 48 EC.

   105.

   It must therefore be concluded that Articles 43 EC and 48 EC preclude national legislation
   such as the WFBV which imposes on the exercise of freedom of secondary establishment in that
   State by a company formed in accordance with the law of another Member State certain
   conditions provided for in domestic law in respect of company formation relating to minimum
   capital and directors' liability. The reasons for which the company was formed in that other
   Member State, and the fact that it carries on its activities exclusively or almost exclusively
   in the Member State of establishment, do not deprive it of the right to invoke the freedom of
   establishment guaranteed by the Treaty, save where abuse is established on a case-by-case
   basis.

   Whether there is any justification

   106.

   As a preliminary point, there can be no justification for the disclosure provisions of the
   WFBV, which have been found to be contrary to the Eleventh Directive (see paragraphs 71 and 72
   above). As a result, only the arguments concerning the provisions of the WFBV relating to
   minimum capital and directors' liability will be considered below.

   Observations submitted to the Court

   108.

   According to the Chamber of Commerce and the Netherlands, German and Austrian Governments, the
   provisions of the WFBV are justified both by Article 46 EC and by overriding reasons relating
   to the public interest.

   109.

   They maintain that the purpose of the WFBV is to counter fraud, protect creditors and ensure
   that tax inspections are effective and that business dealings are fair. Those aims have been
   recognised in the Court's decisions to be legitimate sources of justification.

   110.

   According to the Chamber of Commerce and the Netherlands, German and Austrian Governments, the
   rule in Article 4 of the WFBV concerning minimum capital, its paying-up and its maintenance
   serves to protect creditors and others. Thus, the importance of minimum capital is expressly
   recognised in Article 6 of the Second Directive. The purpose of the rules on minimum capital
   is above all to strengthen the financial capacity of companies and thus to provide greater
   protection of private and public creditors. In a general way they help to protect all
   creditors against the risk of fraudulent insolvency connected to the formation of companies
   which have insufficient capital from the outset.

   111.

   The Netherlands Government submits that directors' liability constitutes an appropriate
   sanction for non-compliance with the provisions of the WFBV. In the absence of Community
   harmonisation measures, the Member States enjoy a wide margin of discretion in determining the
   penalties to be applied in the case of non-compliance with their national rules (Case C-265/95
   Commission v France [1997] ECR I-6959, paragraph 33). The choice of that penalty is on the one
   hand motivated by the wish to apply the same rule as that laid down for directors of a
   Netherlands company. Nor is it unknown to Community law, as may be seen from Article 51 of
   Council Regulation (EC) No 2157/2001 of 8 October 2001 on the Statute for a European company
   (SE) (OJ 2001 L 294, p. 1).

   112.

   On the other hand, the Netherlands Government maintains that, since directors are responsible
   for the proper conduct of company matters, it is to be expected that they should incur
   liability if the company does not comply with the provisions of the WFBV.

   114.

   The Chamber of Commerce adds that the provisions of the WFBV are not discriminatory. In its
   view, they lead instead to the application to foreign companies of the rules applicable to
   companies governed by Netherlands law.

   115.

   The Netherlands Government submits that the provisions of the WFBV concerning minimum capital
   and directors' liability are appropriate for the purpose of attaining the sought-after
   objective. In this regard it emphasises the point that that assessment cannot be made without
   taking into account the fundamental and central objective of the WFBV, namely, to combat
   improper use of foreign companies and abuse of freedom of establishment.

   116.

   In addition, the Austrian Government observes that the rules on minimum capital are an
   appropriate and proportionate means, as is recognised by Community law. As regards joint-stock
   companies, the Second Directive itself established the importance of minimum capital. There is
   however no such rule for limited-liability companies. Nevertheless, all the Member States,
   except Ireland and the United Kingdom of Great Britain and Northern Ireland, have rules on the
   minimum capital to be guaranteed by those companies. Unlike members' personal liability, which
   would frequently be of no use in the event of compulsory liquidation, company capital offers
   greater security.

   117.

   The Chamber of Commerce submits that those measures do not go beyond what is necessary if the
   objective pursued is to be attained. Non-compliance with the obligations imposed by the WFBV
   does not result in refusal to recognise the foreign company but only in the joint and several
   liability of its directors. In that regard the Chamber of Commerce maintains that the fact
   that a company does not satisfy, or no longer satisfies, the rules on minimum capital is clear
   evidence that there is a risk of abuse or fraud, where moreover that company has no real
   connection to its State of formation.

   118.

   Inspire Art, the United Kingdom Government and the Commission put forward the opposite
   argument and are of the view that the provisions of the WFBV are not justified.

   119.

   In the first place, there is no justification for the WFBV to be found in Article 46 EC.

   120.

   As regards abuse of the law, it follows from Centros that the mere fact that a company does
   not carry on any activity in the State of formation cannot constitute such abuse. It is
   instead for the national authorities and courts to establish in every case whether the
   conditions on which such a restriction might be justified have been satisfied. Legislation as
   general as the WFBV does not meet that condition.

   121.

   In their submission, Centros recognised that it was possible for a Member State to restrict
   freedom of establishment where it pleaded non-compliance with provisions concerning the
   carrying on of certain trades, professions or businesses. That is not so in the circumstances
   of this case. So far as Inspire Art is concerned, the issue is not regulation of the conduct
   of its activities in the Netherlands but whether or not the rules of Netherlands company law,
   such as those on minimum capital, must be observed on setting up a secondary establishment in
   the Netherlands. The Court held in that judgment that taking advantage of the more favourable
   rules of another Member State cannot, in itself, constitute an abuse of the right of
   establishment but is a right inherent in the exercise of freedom of establishment.

   122.

   Inspire Art, the United Kingdom Government and the Commission also note that the Court held in
   Centros that the protection of creditors does not in theory fall within the ambit of the
   system of derogations under Article 46 EC.

   123.

   Nor, in their submission, can the provisions of the WFBV concerning minimum capital and
   directors' liability be justified by the imperative public-interest requirement of protection
   of creditors, because those provisions are not such as to guarantee that protection.

   124.

   In that context, Inspire Art and the Commission observe that the company holds itself out as a
   company governed by the law of England and Wales and that creditors cannot therefore be
   deceived on that subject.

   125.

   Furthermore, creditors must take some measure of responsibility for their own actions. If the
   assurances given them by the law of England and Wales do not satisfy them, they can either
   insist on additional security or refuse to conclude contracts with a company governed by
   foreign law.

   126.

   The United Kingdom Government and the Commission maintain that the WFBV would not have been
   applicable if Inspire Art had carried out even minor activity in another Member State. In that
   case the risk run by creditors would, however, have been as great as it would have been if the
   activities were carried out in the Netherlands exclusively, or indeed greater.

   127.

   According to Inspire Art, the minimum capital requirements do not guarantee any protection for
   creditors. Thus, the minimum capital might, for example, be converted into a loan immediately
   once it had been contributed and the company registered, even if the company was governed by
   Netherlands law. It would not therefore satisfy the creditors. Consequently, the provisions of
   the WFBV concerning minimum capital are not such as to achieve the intended purpose of
   protecting creditors.

   128.

   Inspire Art and the Commission maintain that the rules on the joint and several liability of
   directors are discriminatory. Article 4(4) of the WFBV makes them jointly and severally liable
   where, after the company has been registered in the business register, minimum capital falls
   below the limit set. By contrast, the directors of a limited liability company governed by
   Netherlands law are not subject to that strict liability. Moreover, as opposed to companies
   governed by Netherlands law, the circle of potentially liable persons is extended to those who
   actually conduct the company's activities.

   129.

   Inspire Art, the United Kingdom Government and the Commission submit that the provisions of
   Article 4(1), (2) and (4) of the WFBV are disproportionate because Inspire Art holds itself
   out as a company governed by the law of England and Wales.

   130.

   Furthermore, less radical measures could in their view be envisaged. For example, as the Court
   has acknowledged in Centros, it could be made possible in law for public creditors to obtain
   the necessary guarantees from those foreign establishments, in so far as they feel that they
   are insufficiently protected by the company law of the State of formation.

   The Court's answer

   131.

   It must first of all be stated that none of the arguments put forward by the Netherlands
   Government with a view to justifying the legislation at issue in the main proceedings falls
   within the ambit of Article 46 EC.

   132.

   The justifications put forward by the Netherlands Government, namely, the aims of protecting
   creditors, combating improper recourse to freedom of establishment, and protecting both
   effective tax inspections and fairness in business dealings, fall therefore to be evaluated by
   reference to overriding reasons related to the public interest.

   133.

   It must be borne in mind that, according to the Court's case-law, national measures liable to
   hinder or make less attractive the exercise of fundamental freedoms guaranteed by the Treaty
   must, if they are to be justified, fulfil four conditions: they must be applied in a
   non-discriminatory manner; they must be justified by imperative requirements in the public
   interest; they must be suitable for securing the attainment of the objective which they
   pursue, and they must not go beyond what is necessary in order to attain it (see, in
   particular, Case C-19/92 Kraus [1993] ECR I-1663, paragraph 32; Case C-55/94 Gebhard [1995]
   ECR I-4165, paragraph 37, and Centros, paragraph 34).

   134.

   In consequence, it is necessary to consider whether those conditions are fulfilled by
   provisions relating to minimum capital such as those at issue in the main proceedings.

   135.

   First, with regard to protection of creditors, and there being no need for the Court to
   consider whether the rules on minimum share capital constitute in themselves an appropriate
   protection measure, it is clear that Inspire Art holds itself out as a company governed by the
   law of England and Wales and not as a Netherlands company. Its potential creditors are put on
   sufficient notice that it is covered by legislation other than that regulating the formation
   in the Netherlands of limited liability companies and, in particular, laying down rules in
   respect of minimum capital and directors' liability. They can also refer, as the Court pointed
   out in Centros, paragraph 36, to certain rules of Community law which protect them, such as
   the Fourth and Eleventh Directives.

   136.

   Second, with regard to combating improper recourse to freedom of establishment, it must be
   borne in mind that a Member State is entitled to take measures designed to prevent certain of
   its nationals from attempting, under cover of the rights created by the Treaty, improperly to
   circumvent their national legislation or to prevent individuals from improperly or
   fraudulently taking advantage of provisions of Community law (Centros, paragraph 24, and the
   decisions cited therein).

   137.

   However, while in this case Inspire Art was formed under the company law of a Member State, in
   the case in point the United Kingdom, for the purpose in particular of evading the application
   of Netherlands company law, which was considered to be more severe, the fact remains that the
   provisions of the Treaty on freedom of establishment are intended specifically to enable
   companies formed in accordance with the law of a Member State and having their registered
   office, central administration or principal place of business within the Community to pursue
   activities in other Member States through an agency, branch or subsidiary (Centros, paragraph
   26).

   138.

   That being so, as the Court confirmed in paragraph 27 of Centros, the fact that a national of
   a Member State who wishes to set up a company can choose to do so in the Member State the
   company-law rules of which seem to him the least restrictive and then set up branches in other
   Member States is inherent in the exercise, in a single market, of the freedom of establishment
   guaranteed by the Treaty.

   139.

   In addition, it is clear from settled case-law (Segers, paragraph 16, and Centros, paragraph
   29) that the fact that a company does not conduct any business in the Member State in which it
   has its registered office and pursues its activities only or principally in the Member State
   where its branch is established is not sufficient to prove the existence of abuse or
   fraudulent conduct which would entitle the latter Member State to deny that company the
   benefit of the provisions of Community law relating to the right of establishment.

   140.

   Last, as regards possible justification of the WFBV on grounds of protection of fairness in
   business dealings and the efficiency of tax inspections, it is clear that neither the Chamber
   of Commerce nor the Netherlands Government has adduced any evidence to prove that the measure
   in question satisfies the criteria of efficacy, proportionality and non-discrimination
   mentioned in paragraph 132 above.

   141.

   To the extent that the provisions concerning minium capital are incompatible with freedom of
   establishment, as guaranteed by the Treaty, the same must necessarily be true of the penalties
   attached to non-compliance with those obligations, that is to say, the personal joint and
   several liability of directors where the amount of capital does not reach the minimum provided
   for by the national legislation or where during the company's activities it falls below that
   amount.

   142.

   The answer to be given to the second question referred by the national court must therefore be
   that the impediment to the freedom of establishment guaranteed by the Treaty constituted by
   provisions of national law, such as those at issue, relating to minimum capital and the
   personal joint and several liability of directors cannot be justified under Article 46 EC, or
   on grounds of protecting creditors, or combating improper recourse to freedom of establishment
   or safeguarding fairness in business dealings or the efficiency of tax inspections.

   143.

   In light of all the foregoing considerations, the answers to be given to the questions
   referred for a preliminary ruling must be:

   - It is contrary to Article 2 of the Eleventh Directive for national legislation such as the
   WFBV to impose on the branch of a company formed in accordance with the laws of another Member
   State disclosure obligations not provided for by that directive.

   - It is contrary to Articles 43 EC and 48 EC for national legislation such as the WFBV to
   impose on the exercise of freedom of secondary establishment in that State by a company formed
   in accordance with the law of another Member State certain conditions provided for in domestic
   company law in respect of company formation relating to minimum capital and directors'
   liability. The reasons for which the company was formed in that other Member State, and the
   fact that it carries on its activities exclusively or almost exclusively in the Member State
   of establishment, do not deprive it of the right to invoke the freedom of establishment
   guaranteed by the EC Treaty, save where the existence of an abuse is established on a
   case-by-case basis.

   

   1. It is contrary to Article 2 of the Eleventh Council Directive 89/666/EEC of 21 December
   1989 concerning disclosure requirements in respect of branches opened in a Member State by
   certain types of company governed by the law of another State for national legislation such as
   the Wet op de Formeel Buitenlandse Vennootschappen (Law on Formally Foreign Companies) of 17
   December 1997 to impose on the branch of a company formed in accordance with the laws of
   another Member State disclosure obligations not provided for by that directive.

   

   2. It is contrary to Articles 43 EC and 48 EC for national legislation such as the Wet op de
   Formeel Buitenlandse Vennootschappen to impose on the exercise of freedom of secondary
   establishment in that State by a company formed in accordance with the law of another Member
   State certain conditions provided for in domestic company law in respect of company formation
   relating to minimum capital and directors' liability. The reasons for which the company was
   formed in that other Member State, and the fact that it carries on its activities exclusively
   or almost exclusively in the Member State of establishment, do not deprive it of the right to
   invoke the freedom of establishment guaranteed by the EC Treaty, save where the existence of
   an abuse is established on a case-by-case basis.