The freedom of establishment is considered to be one of the essential freedoms in establishing the European internal market. Article 49 and 54 in the Treaty on the Functioning of the European Union (TFEU) grants persons and companies the right to set up establishments and pursue economic activity within the Member States of the European Union, the articles are however complicated and the Court of Justice has in many case explained how these articles are to be interpreted.

A company is free to establish itself through a primary establishment in any Member State and has the right to open up secondary establishment in another Member State. This can be done regardless if this is done just the take advantage of the more favourable legislation in the first state. The transfer of the entire or parts of a company´s establishment fall  outside the scope of freedom of establishment, then national legislation determine if transfer is allowed or not. The outcome of a transfer varies widely because of the differences in national law. In some cases a company is forced to wind-up and liquidate while in other cases the transfer is allowed.  This shows that there is a need for harmonisation in the freedom of establishment for companies.

A new distinction of transfer was introduces in the latest ruling in the Cartesio case. A company can transfer from one Member State to another if it intends to convert to a company form of the new state, however, only if the legislation of new state allows it. The Court of Justice allowed a new kind of transfer and it must now be regulated in order for companies to be able to take advantage of this increase in corporate mobility.