The right of companies to cross-border conversion under the TFEU Rules on Freedom of Establishment

In Cartesio the ECJ treats the cross-border conversion as the process that in the light of Treaty rules on free movement not necessarily must be permitted by the Member State of destination. The Court's stance may be explained by the fact that it considers the legal rules concerning conversion as issued by the Member State of destination as being situated outside the scope of application of the Treaty rules on freedom of establishment, because – according to the Court – they concern merely the preliminary question with regard to the freedom of establishment (i.e. the qualification of a given entity as a company within the meaning of Article 54 TFEU), and not the question of restriction on the freedom of establishment of the company concerned. The present article questions such an assumption, arguing that it is based on incorrect interpretation of Article 54 TFEU. However, if the Court's position in Cartesio is to be maintained, then the realization of cross-border conversion within the EU will be strongly hindered. As the result, the much awaited (and currently still not adopted) Fourteenth Directive turns out to be the necessary prerequisite of effectuating the cross-border conversions in practice.