The Case for Market-Mimicking Supranational Corporate Forms in Europe

Abstract

In its Consultation on the Future of European Company Law the European Commission asks: What purpose can and should supranational corporate forms have in European corporate law? What form and content should their legal regulation take? The answers to these questions depend on the extent to which it is possible and probable that there will be regulatory competition between the EU Member States (horizontal competition) and between the EU and its Member States (vertical competition) to provide the best possible corporate law. This article first looks at these questions from a comparative law perspective based on experience in Australia, the USA and Canada. It then develops an approach for creating a range of supranational corporate forms in the EU. The corporate forms should embody the corporate law rules that a legislator would choose in the context of a functional, active, horizontal regulatory competition among Member States. Supranational corporate forms should mimic the results of such competition. This approach expands regulatory competition in the EU by adding a third, “diagonal” dimension: The EU legislator confronts the Member States with the results of a hypothetical, active horizontal competition for incorporations. If the resulting corporate form is attractive to EU citizens, mere passive competition between Member States will be sufficient to ensure that the results are transformed into national law of the Member States. This would enrich the regulatory competition in Europe in a meaningful and useful way. For the formulation of this EU supranational corporate form, the EU legislator can draw on more than 35 years of economic analysis of corporate law. In addition, Delaware General Corporation Law offers a limited comparative “litmus test”.