BREXIT: the end of “European passport” for UK companies ?

January 17, 2017

BREXIT is not a meaningless word: it also means “exit” for British companies, which will not benefit from the “passport” enabling them to sell goods and services in the EU without restrictions anymore. Unless the agreements that will be negotiated let them keep the benefit of this passport, which will certainly not be uniform and will depend on sectors. A “Norwegian type” agreement would thus enable them to access the single market, but under the condition to respect European legislation on concerned sectors, without being able to discuss it or to take part to it… Which seems possible for goods, but difficult concerning services, especially financial, banking and insurance services, these sectors being now so much regulated at the European level, and even more since with its exit, Great Britain will not be able to object to a strengthening of the sector’s regulations anymore. It is therefore likely that at least a part of the operators will seek to relocate part of their activities within the EU in order to be able to keep operating on this market. As long as Great Britain is still in the EU, this relocation within the EU is still possible without the company losing its legal personality that is without having to liquidate its business in Great Britain.

Basic principles related to free movement, applying to natural persons as well as to legal entities, should be reminded. In its Vale Epitési judgment of 12 July 2012, the CJEU reminded the right of EU companies to transfer their headquarters to another Member State. The host State may not object to such a transfer, implying however a certain procedure, especially that corporate forms of the place of the State of origin are fulfilled (especially authorization of shareholders, by a majority provided for by the law). The transfer may occur under the corporate form of the State of origin, if it is compliant with rules of the host State (which will be rare), or will imply a change of corporate form, the company adopting a corporate form of the host State. Most often, the State of origin will however require that taxes due before the transfer are paid off before the transfer.

BELOT MALAN & Associés has a good expertise in European business law and remains available if you want more information thereupon.

Regarding more particularly the insurance and insurance broking sector, the law firm has an expertise in insurance law (thereupon, see our observations about BREXIT in the insurance section below).