Opinion of Advocate General Szpunar delivered on 14 October 2020

(a) Positions of the parties

45. The applicant claims that, according to Article 30(1)(e) of Directive 2017/1132, the appointment, termination of office and particulars of the persons who are authorised to represent the company must be disclosed at the time of registering a branch in the commercial register. It infers from that article that Directive 2017/1132 exhaustively governs the personal details of managing directors. It argues that recital 8 of the directive confirms its interpretation, stating as it does that disclosure should enable third parties to ascertain, especially, the particulars of the persons who are authorised to bind the company.

46. In contrast, according to the German Government, on a contrary interpretation, Article 30(1)(e) of Directive 2017/1132 shows that the directive concerns solely the appointment, termination of office and particulars of the company’s representative. Furthermore, according to that government, the obligation to provide an assurance that managing directors have been duly instructed of their unrestricted duty to provide information to the court of registration relates to the part of the companies register procedure pertaining to registration of a branch. That obligation is laid down by a procedural rule.

47. In the same vein, the Commission contends that the assurance that must be provided in respect of the personal suitability of the managing director does not constitute disclosure of the determining characteristics of a branch, but is an administrative and procedural requirement imposed by German companies law.

(b) Analysis

48. In order to provide a reply to the first part of the second question referred that will be of use to the referring court, it is necessary to determine whether the obligations imposed in German law are disclosure obligations within the meaning of Article 30 of Directive 2017/1132 or – as the German Government and the Commission, in essence, contend – requirements for creating or registering a company or branch of a company.

49. The Inspire Art⁽¹⁴⁾ judgment provides useful guidance in that context.

50. It can be seen from that judgment, first, that a national provision requiring the address of the sole member to be recorded in the commercial register of the host Member State falls under Article 2 of Directive 89/666 and would, therefore, fall under Article 30 of Directive 2017/1132. The Court in fact held in that judgment that Article 2 of Directive 89/666 precluded a provision according to which the branch of a company incorporated in accordance with the legislation of another Member State had an obligation of that nature, since Directive 89/666 contained no such obligation.⁽¹⁵⁾ However, if Directive 89/666 is to preclude such an obligation, that obligation must fall within the scope ratione materiae of that directive.

51. Article 2(1)(e) of Directive 89/666 provided – as Article 30(1)(e) of Directive 2017/1132 now provides – that the disclosure obligation concerned documents and particulars relating to the appointment, termination of office and particulars [in the French version, literally, ‘identity’] of the persons who are authorised to represent the company in dealings with third parties and in legal proceedings. According to recitals 8 and 16 of Directive 2017/1132, the disclosure obligation serves to protect third parties who deal with companies through the intermediary of branches. Knowing the address of the company’s representative is not, in principle, relevant to protecting those third parties. Accordingly, disclosure relating to the address of a representative, although it does indeed relate to the representative and, as a disclosure obligation, falls under Directives 89/666 and 2017/1132, does not, as such, make it possible to identify that representative. That disclosure cannot therefore be treated as the disclosure of ‘particulars’ within the meaning of those directives.

52. Secondly, it emerges from the Inspire Art⁽¹⁶⁾ judgment that Directive 89/666 did not apply, in contrast, to national provisions under which the opening of a branch in a host Member State was subject to a number of rules laid down in that Member State in respect of company formation. The same must apply to Directive 2017/1132.

53. When the lessons from the Inspire Art⁽¹⁷⁾ judgment are transposed to the present case, doubts arise as to whether an obligation to provide an assurance regarding circumstances capable of disqualifying a company’s representative can be treated as a disclosure obligation. Indeed, it can be seen from Paragraph 6(2) of the GmbHG that the assurance in question relates to circumstances which, in particular at the time a company is formed in Germany, primarily determine a person’s capacity to be registered as its managing director. Further, the referring court states that in the absence of an assurance that a notary, a member of a comparable legal advisory profession or a consular officer has instructed the managing director of his or her unrestricted duty to provide information to the court, ‘no entry in the commercial register [can take] place’. In certain circumstances, provision of that latter assurance also determines whether criminal penalties can be imposed on a managing director. Obliging a managing director to provide those two assurances is therefore comparable not to subjecting the opening of a branch in a host Member State to disclosure obligations but to subjecting it to certain rules laid down in that Member State relating to the formation of a company.

54. In addition, Directive 2019/1151 also bears out the fact that assurances relating to circumstances concerning personal capacity fall completely outside the subject matter of Directive 2017/1132.

55. As the German Government states, Directive 2019/1151 introduced provisions relating to ‘disqualified directors’ into Directive 2017/1132. The Commission, for its part, refers in particular to Article 13i(2) of Directive 2017/1132, as amended by Directive 2019/1151, according to which ‘Member States may require that persons applying to become directors declare whether they are aware of any circumstances which could lead to a disqualification in the Member State concerned’ and that ‘Member States may refuse the appointment of a person as a director of a company where that person is currently disqualified from acting as a director in another Member State’.

56. In that context, the only amendment that Directive 2019/1151 made to Article 1 of Directive 2017/1132, which defines the subject matter of that directive,⁽¹⁸⁾ was to insert a sentence to the effect that the directive also establishes measures concerning ‘the rules on online formation of companies, on online registration of branches and on online filing of documents and information by companies and branches’. It can therefore be inferred that national provisions relating to the declarations – referred to in Article 13i of Directive 2017/1132, as amended by Directive 2019/1151 – by persons applying to become directors in respect of obstacles to appointment as company managing directors, are, to the EU legislature, rules relating to the formation of companies or the registration of branches. To the EU legislature, such provisions do not, on the other hand, relate to ‘disclosure requirements in respect of branches opened in a Member State by certain types of company governed by the law of another State’, to borrow the original wording of Article 1 of Directive 2017/1132.

57. It must therefore be found that the duties addressed in the second question referred do not fall within the scope ratione materiae of Directive 2017/1132. In view of the considerations set out in point 27 of this Opinion, it is now necessary to examine whether those obligations comply with Articles 49 and 55 TFEU.

(a) Application of the obstacles to the appointment of company managing directors to branches of companies established in other Member States

66. It should be noted at the outset that the obligations addressed in the second question referred are imposed, preventively and across the board, on companies already formed in accordance with the law of another Member State and on the managing directors of those companies, even where they are registered as managing directors of those companies in their Member State of establishment. Those obligations are therefore imposed on the managing directors of companies established in other Member States on the premiss that the obstacles to the appointment of company managing directors laid down in German law apply to those managing directors.⁽²¹⁾

67. In the light of the considerations advanced in point 56 of this Opinion, in the mind of the EU legislature, those obstacles are linked to the requirements for the formation of companies or, potentially, registration of their branches.

68. The companies or firms to which Article 54 TFEU relates are entitled to carry on their business in another Member State through, inter alia, a branch, and, for those companies, 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.⁽²²⁾ The freedom of establishment for those companies or firms includes, inter alia, the right to set up and manage such companies or firms under the conditions laid down, by the legislation of the Member State where such establishment is effected, for its own companies or firms. It should be noted in that respect that the obstacles to the appointment of company managing directors under German law do not appear to be applied on the basis of a belief that, because a branch is located in Germany, a company is entirely connected with the legal system of that Member State.⁽²³⁾

69. That being so, it is indeed the case that the fact of subjecting the registration of a branch to additional requirements that erect such obstacles in the law of a Member State other than that of the Member State where the company is established, where the company has a connection with that law, is not tantamount to an outright negation of freedom of establishment.⁽²⁴⁾ Nevertheless, that fact makes registering at the very least more difficult and therefore constitutes a restriction on freedom of establishment.⁽²⁵⁾

70. It is also true that the requirements at issue relate directly to the personal suitability of the managing director of a company rather than to the company itself. Nevertheless, if those requirements are not satisfied, a branch of that company will be refused registration. It is therefore appropriate to find that the obstacles to the appointment of company managing directors under German law are not applied in connection with the companies’ business in the strict sense but do, in contrast, relate to the formation of a company or its subsequent establishment in another Member State.⁽²⁶⁾

71. Moreover, in Segers,⁽²⁷⁾ the Court held that discrimination in connection with a director’s social security protection on the basis of where the company he or she ran had its registered office indirectly restricts the freedom of companies of another Member State to establish themselves through an agency, branch or subsidiary in the Member State concerned. With all the more reason, imposing additional requirements that erect obstacles to the appointment of company managing directors likewise restricts that freedom.

72. In that context, a Member State in which an application has been made to register a branch 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.⁽²⁸⁾ It is therefore necessary to determine whether the obstacles to the appointment of company managing directors in force in that Member State can justifiably be applied to the branches of companies established in other Member States, having regard to that objective.

(b) Combating abuse of freedom of establishment

73. It emerges from the Court’s case-law that the concept of ‘abuse of rights’ is an autonomous concept of EU law, according to which ‘a finding of abuse requires, first, a combination of objective circumstances in which, despite formal observance of the conditions laid down by the [EU] rules, the purpose of those rules has not been achieved. It requires, secondly, a subjective element consisting in the intention to obtain an advantage from the [EU] rules by creating artificially the conditions laid down for obtaining it’.⁽²⁹⁾

74. In a context in which courts must have regard to the objectives pursued by the provisions of EU law of which an individual must not improperly or fraudulently take advantage, in Centros⁽³⁰⁾ the Court seemed to draw a distinction, within the national provisions whose application those individuals were seeking to evade, between, first, rules governing the formation of companies and, secondly, rules on the carrying on of certain trades, professions or businesses. In that regard, the Court held that the national provisions at issue fell squarely within the first category and that, in the circumstances of the case, their application could not be justified in the interests of combating abuse of freedom of establishment. Academic commentators have inferred from the foregoing that it may be easier to invoke abuse where the intention is to evade the application of rules relating to the carrying on of certain trades, professions or businesses.⁽³¹⁾

75. However, the obstacles to the appointment of company managing directors under German law apply to any trade, profession or business carried on through a branch and, in the light of the changes brought about by Directive 2019/1151, are linked to the requirements relating to the formation of companies or the registration of branches.⁽³²⁾

76. It is also apparent from the case-law that it cannot be assumed systematically and in all cases that there is abuse or fraud. Denial of the right to enjoy freedom of establishment on grounds of abusive or fraudulent conduct must be on a case-by-case basis.⁽³³⁾

77. There is no factor, whether objective or subjective, suggesting that the application to register a branch in the commercial register in the main proceedings constitutes abusive or fraudulent conduct. Moreover, according to the referring court, there is no certainty in the present case that any obstacle exists under German law to the appointment of the managing director and there is nothing to indicate any such prohibition. It would seem therefore that the obstacles under German law to the appointment of company managing directors and the obligations addressed in the second question referred and intended to combat abuse of freedom of establishment are applied preventively and in all cases on the premiss that any registration of a branch in Germany is undertaken in order to evade those obstacles. Accordingly, in the light of the considerations set out in the preceding point, neither the application of those conditions nor the imposition of those obligations can be found to comply with Articles 49 and 54 TFEU on that account.

78. For the sake of completeness, I note that the German Government contends that the changes made by Directive 2019/1151 in relation to disqualified directors⁽³⁴⁾ demonstrate that, under that directive, the Member States retain their discretion to define for themselves the personal suitability required of company representatives. According to that government, there is no reason why the Member States cannot have recourse to the tool available in the form of the preventive control of abuse.

79. However, those changes – which do not apply in the main proceedings – do not cast doubt on the findings made in the preceding points of this Opinion.

80. Admittedly, recital 3 of Directive 2019/1151 states that the directive is intended to provide the necessary safeguards against abuse and fraud. In that context, recital 23 of that directive allows the Member States to refuse the appointment of a person as a director of a company, taking into account not only the former conduct of that person in their own territory, but, where so provided under national law, also information provided by other Member States. In the same vein, recital 24 states that, to ensure that all persons interacting with companies or branches are protected and that fraudulent or other abusive behaviour is prevented, the competent authorities in Member States must be able to verify whether the person to be appointed as a director is not prohibited from performing the duties of a director.

81. According to the explanatory memorandum of the proposal for Directive 2019/1151,⁽³⁵⁾ Article 13i of Directive 2017/1132, as amended by Directive 2019/1151, establishes a legal framework for Member States to request information from other Member States concerning disqualified directors. According to that article, Member States may check with other Member States if a person to be registered as a director of a company is disqualified from acting as a director in another Member State on the basis of the national law of that Member State.

82. The basic premiss of Directive 2019/1151 is that, under that legal framework, it is in the Member State where the company is established that abusive or fraudulent conduct consisting of forming a company in another Member State in order to circumvent a prohibition on acting as a director can be prevented systematically and across the board. In that context, a Member State may, under the second sentence of Article 13i(2) of Directive 2017/1132, as amended by Directive 2019/1151, refuse the appointment of a person as a director of a company where that person is disqualified from acting as a director in another Member State.

83. An analysis of the other provisions introduced by Directive 2019/1151 bears out that finding.

84. As the Commission notes, under Article 13g(3)(f) of Directive 2017/1132, as amended by Directive 2019/1151, the detailed rules for the online formation of companies to be laid down by the Member States include rules on the ‘procedures to verify the appointment of directors’. Article 28a of that directive contains similar provisions relating to the online registration of branches. However, the list, in Article 28a(3) of that directive, of the aspects in relation to which the Member States must lay down detailed rules, whilst very similar to the list in Article 13g, does not refer to the procedures for verifying directors.

85. It is also necessary to determine whether a restriction on freedom of establishment arising from application of the obstacles under German law to the appointment of company managing directors may be justified by other reasons adduced both by the referring court and by the German Government, that is to say, creditor protection and the protection of fair trading.

(c) Creditor protection and the protection of fair trading

86. Even though creditor protection and the protection of fair trading are imperative reasons in the public interest,⁽³⁶⁾ measures justified on that basis must also satisfy the criteria of being non-discriminatory, effective and proportionate, set out in point 59 of this Opinion.

87. First of all, since obstacles to the appointment of company managing directors under German law are also applied to companies established in Germany, nothing suggests that those conditions are applied in a discriminatory manner.

88. Thereafter, as regards creditor protection and the protection of fair trading, admittedly, the fact that a person who has lawfully been appointed as a managing director of a company established in another Member State falls foul of the obstacles to appointment under Paragraph 6(2), second sentence, points 2 and 3, and third sentence of the GmbHG does not necessarily mean that such a person is not empowered, through a branch, to represent a company in dealings with third parties.

89. Nevertheless, in German law, the obstacles to the appointment of company managing directors take the form, first, of a prohibition, ordered by a court or public authority, on practising a profession or trade corresponding to the business of the branch. Such prohibitions are ordered precisely in order to protect trading. Secondly, the obstacles to the appointment of company managing directors also include those in the form of convictions for certain intentional offences, that is to say, insolvency offences and those consisting of fraud or of filing false or inaccurate business information. Those are the only convictions that can effectively reflect an intention to protect the fairness of commercial transactions.

90. Lastly, as regards whether they are proportionate, in my view applying the obstacles under German law to the appointment of company managing directors does not go beyond what is necessary to achieve the objective pursued by application of those obstacles. Although those obstacles also apply to persons already lawfully registered as company managing directors in other Member States, since such obstacles are not harmonised at EU level, it cannot be assumed that every Member State has laid down similar obstacles and that applying the obstacles under German law to the appointment of company managing directors would therefore lead to a duplication of obstacles or formalities. Moreover, at the time of forming a company it is impossible to anticipate all the decisions it will make relating to the registration of its branches. It is therefore not inconceivable that the company’s Member State of establishment may not be able to ensure in all respects that it has complied with the obligations relating to appointment in force in the host Member State of its branches. Furthermore, application of those obstacles ensures that effect is given to any prohibitions ordered by a court or public authority on practising a profession or trade in the territory of the European Union.

91. In short, subjecting the registration of a branch to additional conditions laid down by the law of a Member State other than that of the Member State of establishment, which erect obstacles to the appointment of company managing directors, as German law does, does therefore constitute a restriction on freedom of establishment. However, that restriction may be justified in the interests of creditor protection and the protection of fair trading.

92. It is now necessary to determine whether the foregoing also applies to the obligations addressed in the second question referred. The fact that the application of obstacles to the appointment of company managing directors, under national legislation, may be compatible with EU law does not mean that the same necessarily applies to any measure intended to verify, in accordance with that legislation, that no such obstacles exist.

(d) Justification of the obligations at issue on grounds of creditor protection and the protection of fair trading

93. Since the obligations addressed by the second question referred apply on the same terms as the obstacles under German law to the appointment of company managing directors, there is nothing to suggest that those obligations are applied in a discriminatory manner.

94. As regards the efficacy of the obligation to provide an assurance that no such obstacles exist, Directive 2019/1151 acknowledges that the obligation effectively protects creditors and fair trading. Article 13i(2) of Directive 2017/1132, introduced by Directive 2019/1151, read in conjunction with recitals 23 and 24 of Directive 2019/1151, provides that, in order to ensure that all persons interacting with companies are protected, Member States may require that ‘persons applying to become directors declare whether they are aware of any circumstances which could lead to a disqualification in the Member State concerned’.

95. Since there is no system for the automatic exchange of information on obstacles to the appointment of company managing directors, that obligation does not appear to go beyond what is necessary to achieve the objective of creditor protection and the protection of fair trading without imposing an unreasonable burden on the persons concerned. Nor does it seem that an exceptionally in-depth study of German law is necessary in order to be familiar with the overriding mandatory provisions of the Member State of registration of a branch, which erect obstacles relating to trustworthiness in business such as those laid down in German law.

96. Although the obligation to provide an assurance that there are no obstacles to the appointment of managing directors is justified, the same is not so of the obligation to provide an assurance that a notary, a member of a comparable legal advisory profession or a consular officer has instructed the managing director of his or her unrestricted duty to provide information to the court in this connection.

97. There is nothing to justify a requirement that the assurance must be provided by a managing director and may not be provided by the person who has instructed the managing director of the obligation to provide information to the court of registration. The obligation to provide that assurance in fact flows from the national law rules on criminal liability. If there were no such assurance, the person concerned would be entitled not to disclose certain convictions and the penalties laid down for false declarations in relation to those convictions would not apply to that person. A Member State’s interest in widening the scope of the criminal liability of managing directors to include declarations concerning the existence of obstacles to their appointment is not necessarily the same as an interest in protecting creditors. It would be sufficient for managing directors not to be exempted, as a matter of principle, from the requirement to disclose those convictions.

98. For the sake of completeness, the foregoing does not prejudge whether or not the criminal penalties attaching to the obligations addressed in the second question referred are in conformity with EU law.