Risks to limited liability status outside the UK
by Sharon Fryer
Under English law, a company can be incorporated here but have its management and control in another company – this makes it possible, for example, for a company to be incorporated in England (and therefore subject to English company law) but tax resident elsewhere.
However, other countries (including Austria, France, Germany and Italy) adopt a “real seat” approach – such that if a company legally incorporated in another country is in fact managed and controlled in a “real seat” territory, that company must, in principle, re-incorporate as a local company in order to have legal capacity there.
It was ruled by the European Court of Justice that EU member states had to recognise the validity of companies incorporated in other member states, and could not require re-registration. However, following Brexit, this will cease to apply to English companies. Therefore, English companies having their management in a “real seat” country are at risk of no longer being recognised in that country as a body corporate and, in particular, of losing the benefit of limited liability status.
If you have any queries about this article, please get in touch with Sharon Fryer, whose details appear below.