Limited Legal Rights For Swiss Companies Seated In Germany

by Ulrika Lomas, Tax-News.com, Brussels

08 December 2008

The German Federal Court of Justice has ruled that Swiss joint stock companies, having transferred their administrative seat to Germany, remain subject to Germany’s ‘Sitztheorie’ or ‘Real Seat Theory’, and are, consequently, entitled to only limited legal rights in the German law courts.

Following a recent complaint filed by a Swiss joint stock company – now seated in Germany – the German Federal Court of Justice has defined the legal rights to which Swiss joint stock companies are entitled.

Under German law, legal conflicts between companies are settled by referring to the relevant law prevailing in the company's actual domicile or ‘real seat’. However, in the absence of any statutory provision, the so-called ‘Sitztheorie’ is traditionally applied.

Rejecting claims by the Swiss company that, as a company founded in a European state, within the European Economic Area, its status as a foreign company stands under the freedom of establishment law, the Court eventually upheld the defendant’s claim that the ‘Real Seat Theory’ applies, since Switzerland is the only member state not to have signed the EEA treaty.

According to the Court, by transferring its seat to Germany, the Swiss company has effectively relinquished its status as a legal entity, although it remained entitled to appear before the German courts as a ‘natural person’, with limited legal rights.

Recommended