On 12 July 2012 the European Court of Justice (ECJ) ruled in the VALE case (C-378/10) that
“Articles 49 TFEU and 54 TFEU are to be interpreted as precluding national legislation which enables companies established under national law to convert, but does not allow, in a general manner, companies governed by the law of another Member State to convert to companies governed by national law by incorporating such a company.”
The case concerned a cross-border conversion of a company established under Italian law, VALE Construzioni Srl, into a company incorporated under Hungarian law, VALE Építési kft. Under Italian law it is possible for a company to convert into a company established under foreign law. Under Hungarian law only companies incorporated under the law of Hungary are allowed to convert. The VALE case is the ‘mirror image’ of the Cartesio case (C-210/06) which concerns a transfer of a registered office of a company under Hungarian law to Italy without a conversion. In the Vale case the Court stated that a Member State may restrict a company governed by its law to retain the status of the company established under the law of that Member State if the company intends to move its seat to another Member State, thereby breaking the connecting factor required under the national law of the Member State of incorporation. However, the Member State of origin of that company cannot prevent a company from converting itself into a company governed by the law of the other Member State, to the extent that it is permitted under that law to do so.