Introduction

The European Union originally was conceived as creating an economic community between Member States. A key pillar of the European Community is the principle of free movement as expressed in the free movement of persons, goods, services and capital. Together with the EU rules on competition they form the European Community's economic constitutional law. Part of the free movement of persons is the freedom of establishment. This freedom includes ‘the right to take up and pursue activities as self-employed persons and to set up and manage undertakings, in particular companies or firms…under the conditions laid down for its own nationals by the law of the country where such establishment is effected, subject to the provisions of the Chapter on capital’ (Article 43 Treaty of Rome). In order to attain freedom of establishment the Council and the Commission are required to ‘co-ordinate to the necessary extent the safeguards which, for the protection of the interests of members and others, are required by Member States of companies or firms…with a view to making such safeguards equivalent throughout the Community’ (art. 44 (2) (g)). This Treaty provision is the basis for the harmonization of company law in the European Union. It is a rather peculiar basis.