Freedom of establishment has been a promise not only to individuals, but also to companies, ever since the foundation of the EEC, and the relevant articles in the EEC Treaty have long been declared to have direct effect (Reyners v. Belgium [1974] E.C.R. 631). Yet until recently companies faced extra hurdles. A majority of the Member States applied the so-called “theory of the real seat” (for references see H. Xanthaki, “Centros: is this really the end for the theory of the siège réel?” (2001) 22 Company Lawyer 2). In essence, the theory is a rule of private international law that a company will be treated according to the law of its central place of management (the “real seat”), notwithstanding that it may have been incorporated in a different jurisdiction. In such a case, the company will not fulfil the formal requirements of registration in the jurisdiction of its real seat and will normally lack the quality of a legal person there. The aim of the theory is to preserve national company law as a policy instrument in areas such as corporate governance, by disallowing pseudo-foreign companies, i.e. companies set up to do business mainly or exclusively in one jurisdiction, but evading local regulation there by incorporating abroad. But the theory can strike beyond this goal, as the facts of Case C-208/00 Überseering BV v. Nordic Construction Company Baumanagement GmbH demonstrate.
