EU Company Research Articles

The relationship between the Societas Unius Personae proposal and the acquis: Creeping Toward an Abrogation of EU Company Law?

The relationship between the Societas Unius Personae proposal and the acquis: Creeping Toward an Abrogation of EU Company Law?

Directorss Conflicts of Interest: A Contribution to European Convergence

It is widely acknowledged in the USA and Europe that a core obligation of directors to their companies is a duty of loyalty. It is of fundamental importance for a company to be able to rely on the undivided loyalty of its directors. Broadly speaking, the duty of loyalty is the principle that the company’s interests take priority over the private interests of the director. A number of kinds of the application of the principle are dealt with in this article. The duty of loyalty applies in different ways, the first being as a preventive measure. The duty may be seen as a basis for avoiding conflicts of interest. For example, according to UK law a director has a duty to avoid conflicts of interest (also called ‘no-conflict’), which comprises any conflict or possible conflict that may arise, for example in connection with multiple directorships or where a director carries on or is associated with a business that competes with the company. If a director finds himself or herself in a situation of possible conflict, they should be obliged to terminate the situation. A second way to apply the duty of loyalty is to qualify it as a substantive rule, exemplifying the typical situations in which conflicts of interest occur. According to this, a director should be prohibited from making secret profits, e.g., by exploiting property, information or corporate opportunities, where there is an actual conflict of interest - a no-profit rule. Although they are related, the duties of no-conflict and no-profit are independent of each other. This means that either or both may apply in a given situation. The following review of European Union and national rules on conflicts of interest shows that there are substantial differences between Member States’ companies legislation on conflicts of interest. This article argues that there is a need for European Union convergence in this area. The article contains suggestions for developing models for an EU approach to rules on conflicts of interest which may be acceptable and useful for EU convergence in this area. Section 2 deals with the EU company law that regulates conflicts of interest, and section 3 deals with national laws, including a comparative review of the national legislation of the Member States. In section 4, we consider the core elements which may foster EU convergence.

Cross-Border Investments in Undertakings and the Future of EU Company Law

The golden share case law and other recent case law of the ECJ form a basis for the development of a rule of internal market law that all rules of general company law that may have as an effect that investors are prevented or deterred from making cross-border investments in undertakings restrict the freedom of establishment and the free movement of capital. Relevant rules that potentially restrict the freedom of establishment and the free movement of capital are, inter alia, rules that allow shareholders to include deviations from the principle of 'one share, one vote' in articles of association, such as multiple voting rights. Other potentially restricting rules are employee co-decision rules and shareholder liability rules. If certain of these rules are judged to restrict the fundamental freedoms, this would necessitate a fundamental reconsideration of the existing company laws of the Member States from the perspective of restrictions to cross-border investments.

Moving Into, Through and Out of the EU with Corporate Continuity

The possibility for non-EU companies to move into a certain EU Member State (with corporate continuity), to thereafter move through the EU as an EU company and subsequently exit the EU (with corporate continuity) would improve the (proper functioning of the) internal market of the EU.

The EU’s Shareholder Empowerment Model in the Context of the Sustainable Companies Agenda

This article examines the current EU company law policy promoting shareholder engagement in the context of the Sustainable Companies Agenda. It suggests that affording greater power to shareholders and encouraging greater engagement may not advance the Agenda unless shareholders anticipate a direct personal financial benefit. The article also raises the possibility that such a policy could impede progress by the adoption by shareholders of a short-termist approach to the company's operations

Director's Duties in Groups of Companies Legalizing the Interest of the Group at the European Level

The Action Plan of the European Commission of December 2012 on “European company law and corporate governance – a modern legal framework for more engaged shareholders and sustainable companies” mentioned that “the Commission will, in 2014, come with an initiative to improve both the information available on groups and recognition of the concept of ‘group interest’.” The origin of this renewed interest by the European Commission can be found in the report of the Reflection Group on the Future of EU Company Law of 2011. Recognising the interest of the group at the European level would provide many advantages, especially for groups having cross-border activities in the European Union, whether led by a large parent company or a Small and Medium Sized Enterprise (SME). In addition, recognition of the interest of the group has become Ius Commune in Europe. However, there is a need to proceed cautiously. Therefore, a recommendation would be the most attractive legal instrument. Any action at the European level should also take into consideration the distinction between wholly-owned and non-wholly-owned subsidiaries. In the case of the latter, specific instruments of protection of minority shareholders should be left to the Member States to develop.

Legal and other methods for harmonization of the Macedonian Commercial Law with the European Union Commercial Law

In the first part of the Article general differences between the terms harmonization, unification and approximation of law are elaborated. Special emphasize is given to the available legal instruments and methods for harmonization of national law with the acquis communautaire especially in terms of the EU freedom of establishment, including the relevant CJEU case law. Next part of the Article is dedicated to the analyses of the relevant literature and legislation relating to the recent trends (pros and cons) in harmonization of the EU Company Law (including EU insolvency legislation), EU Securities Law and EU Contract Law. Last section of the Article enlightens the current situation with the Macedonian Commercial Law harmonization with the respective EU law.

Company Taxation in the European Union: A Key Challenge 20 Years after the Ruding Report

The author, in this article, attempts to provide a response to the issues raised by the Ruding Report regarding EU company taxation and to assess whether this could result in a new challenge to be taken up to definitively resolve the difficult relationship between direct taxation and the internal market.

Horizontal and Vertical Regulatory Competition in EU Company Law: The Case of the European Private Company (SPE)

Since the Centros decision of the European Court of Justice in 1999, the regime of corporate laws in Europe has evolved in a fundamental way. Although it is rather incomplete and imperfect, a two-level system of corporate laws has emerged. It is characterized by a considerable degree of free choice of law. This opens up the possibility of horizontal regulatory competition between the company laws of the Member States. With the draft regulation on the European Private Company (SPE) an additional legal form tailored to the needs of small and medium-sized enterprises (SMEs) is proposed. We analyse whether the introduction of such a supranational European legal form for limited liability companies can be recommended from the perspective of the economic theory of legal federalism. To this end we present a general theoretical framework for studying centralisation/harmonisation vs. decentralisation of legal rules and regulations in regard to company laws within the European Union. Our analysis of the empirical evidence on horizontal regulatory competition as well as on the advantages and problems of the introduction of such an additional legal form for SMEs shows clearly that it might render many benefits without considerable disadvantages when compared with the existing situation of only horizontal competition between the legal forms of the Member States.

Response to the European Commission’s Action Plan on Company Law and Corporate Governance

The members of the former Reflection Group on the Future of EU Company Law, which published its report in April 2011, decided to publish their views on the “Action Plan on European Company Law and Corporate Governance” of the European Commission of 12 December 2012 as well as subsequent and related developments. We support the Action Plan and note that it has endorsed many proposals included in the report of the Reflection Group. However, some proposals have not been included, although they might be considered at a later stage (loyalty shares, review of the role of independent directors, the Single Member Com-pany), and we reiterate our support for them. On the issue of cross border transfer of seat, we regret that the Commission is not more ambitious. We also reiterate our support for substantive measures in areas related to cross-border operations of companies, including improving cross border shareholder identification. We also support strong monitoring of whether a company has complied with a corporate governance code or, if it has not, it has provided a good quality explanation therefor, rather than imposing substantive regulation. In general, in the areas where substantive regulation is necessary, we call on the Commission to move carefully.

Regulatory Regimes and Norms for Directors’ Remuneration: EU, UK and Belgian Law Compared

This article examines the regulation of directors remuneration in EU, UK and Belgian law. The author argues that there are two categorises of norms for the regulatory framework of directors remuneration: one is market-based, market efficiency norms of agency costs; the other is socio-legal norms. The paper argues that agency costs a responsive mode of governance alone cannot adequately address the problems of directors remuneration. On the other hand, socio-legal norms which are value and ethics-focused can better construct a paradigm capable of addressing a broader issue of directors remuneration in the EU context. Agency costs-based regulation has been used by the EU whereas socio-legal matters have been left to Member States. The article shows how socio-legal norms could form the underlying basis of the regulatory regime by examining the laws in the UK and Belgium. It is concluded that the European Court of Justice will need to carry out the role of negative integration by harmonising these social values in developing EU company law.

EU Freedoms, Non-EU Countries and Company Taxation: An Overview and Future Prospect

Practice shows that the Member States of the European Union maintain a diversified range of economic relations with non-EU Member States. A large number of non-EU-based enterprises are carrying on business in the European Union. Conversely, numerous EU-based enterprises are also carrying on business outside the territory of the Union. Accordingly, trade and investment between Member States and non-Member States is nowadays similarly promoted by abolishing or reducing tax or other obstacles to international flows of goods, services and/or investment between the Member States and third countries. One may recall in this regard the large number of economic integration agreements which the Union has concluded over the past decades with countries all around the world, such as countries in Eastern Europe, the Euro-Mediterranean countries and the African, Caribbean and Pacific states and which, to a greater or lesser extent, provide for liberalization of trade and investment between the Union and the respective non-Member State. The Treaty on the Functioning of the European Union itself also provides for a substantial degree of economic openness vis-à-vis third countries, particularly by means of the Treaty provisions relating to the free movement of capital. It is this unique legal relationship between the EU Member States vis-à-vis the rest of the world that this article takes as a starting point. It examines and assesses the extent to which the impact on Member States' corporate income tax systems of the liberalization provisions included in the above instruments is similar, or should be similar, to the impact that the free movement provisions included in the Treaty have on Member States' corporate income tax systems in an intra-Union context.

Spotlight on the Design of European Audit Committees: A Comparative Descriptive Study

In this study we shed light on the design of audit committees in continental Europe by analysing the contents of the Eighth EU Company Law Directive, European codes of governance, and corporate audit committee charters. Our results show substantial cross‐national differences in the scope of responsibilities to be addressed by audit committees, in the competences required of committee members, and the proportion of independent committee members. The extent of differentiation comes as a surprise in light of prevailing pressures for isomorphism in the design of audit committees. A closer analysis of publicly available audit committee charters shows that compulsory disclosure requirements can increase the effectiveness of coercive isomorphism, but, consistent with prior literature, can also increase the percentage of unoriginal content in corporate documents. Our results contribute to the scant knowledge about audit committees outside the Anglo‐Saxon domain and inform practice about implementing audit committee design standards in the EU.

A Comparative Study of Legal Framework for Single Member Company in European Union and China

Following the policy of “reform and opening up” since 1978, China has experienced a prolonged and impressive period of economic growth and development in the past nearly three decades. The 2005 Chinese new Company Law which was resulted from the economic and legal reform came into force on January 1 st 2006. It is the milestone of recognition to the legal state of single member company in law for the first time in China. While in Europe, it has been commonly recognized by most countries thanks to the EU company law, especially the Single Member Company directive. This article is to explore the peculiarity and similarities between legal system of Single Member Company in Europe and China by analyzing and compare some key provisions in each legal system, thus to shed light on the advantages and drawbacks of the current legal system, so as to inspire law makers in the future.

Report of the Reflection Group on the Future of EU Company Law

This Report, the work of the Reflection Group on the Future of EU Company Law set up by the European Commission in December 2010, addresses current problems and trends in EU company law and makes recommendations for legislative initiatives to be undertaken at the EU level. The Report, after analysing the means and purposes of EU company law harmonization, mainly focuses on issues of cross-border mobility and corporate governance. Among others, the Report recommends new measures to: a) facilitate companies' mobility within the EU; b) improve companies' transparency; c) address myopic behavior in financial markets; and d) ease the integrated management of companies belonging to a group.

The “Abuse of Rights” in EU Company Law and EU Tax Law: A Re-reading of the ECJ Case Law and the Quest for a Unitary Notion

The existence of a concept of “abuse of rights” in the case-law of the ECJ concerning different areas – provision of services; common agricultural policy; company law, tax legislation has been attracting, since the 1990s, much attention and debate in the scholarly literature all over Europe 1 . In effect, the circumstance that the ECJ, in a number of rulings in these different areas, has been using not only the words “abuse” or “abusive purpose” but also the words “fraud” and “circumvention”, provides scope for debate about these concepts (e.g., as to whether “circumvention” can arise without “abuse”) 2 , and as to whether the concept of “abuse” emerging in one area of EU law coincides with or is different from the concept of “abuse” emerging in other areas of EU law 3 . In trying to deal with these two fundamental issues, the academic debate has been focusing on several questions (the responses to which affect the solution to these two fundamental issues): whether it is possible to assert the existence of an anti-abuse principle in EU law; whether such a principle would be a general principle or merely a principle of interpretation; the scope of its application; the consequences of its introduction both in the EU and in Member States' legal systems 4 . The present paper aims at contributing to the debate on these points and thus at contributing to extrapolate a response to the two ultimate issues highlighted above, by

Constrain-Thy-Neighbor Effects as a Determinant of Transnational Interest Group Cohesion

Why does the willingness of interest groups to join forces with their peers abroad vary across issues? The present article points to cross-issue variation in the “constrain-thy-neighbor” effects of transnational law. Interest groups consider not only whether they are worse off if they themselves are subjected to a transnational law. They also consider how it affects them if the same law applies abroad. Depending on the issue, they derive advantages or disadvantages from seeing their neighbors constrained, and this affects their willingness to fight transnational legislation on that issue. To illustrate the argument, the article compares cohesion within the Union of Industrial and Employers’ Confederations of Europe (UNICE), the European peak employer federation, on two aspects of EU company law. UNICE members were divided over EU takeover directives while uniting against EU worker participation directives. Statements released by German and British UNICE members show that the divergent constrain-thy-neighbor effect associated with these issues contributed to variation in cohesion.

A Study on the Auditing System in the EU Company Law

A Study on the Auditing System in the EU Company Law

The Place of Codes of Corporate Governance in The EU Company Law

In the paper the authors analyze the role of corporate governance codes in reaching the best practice in corporate governance. The corporate governance is a set of complementary mechanisms aimed at protecting investors' rights. A special attention is given to the content of a chosen set of EU Codes of Corporate Governance in order to define the main differences but also the significant similarities between them. The chosen set of the EU Codes includes French, Italian, Austrian, German, UK, Swiss, Slovenian, Norwegian and Croatian Code. The authors stressed their opinion that the main differences among the coverage of Codes are the results of the characteristics of the national corporate governance system and law. In the most EU countries complying with the Code's provisions and applying the Code's principles is not obligatory and they are not legally binding. The authors concluded that similarities are bigger than differences and they give a great contribution in improving corporate governance.

Bank Resolution Regimes: Balancing Prudential Regulation and Shareholder Rights

A bank resolution regime requires regulators to have the authority and instruments to restructure a bank's operations if its failure threatens the stability of the financial system or undermines other regulatory objectives, such as depositor confidence. Such regulatory action, however, may affect shareholder rights in the restructured bank and possibly reduce the economic value of their ownership interests. The credit crisis of 2007–09 has demonstrated the importance of having a resolution regime that balances the rights of shareholders against the objectives of prudential regulation and crisis management. The constraints of corporate insolvency regimes can be too cumbersome for effective resolution of a banking enterprise, especially during a financial crisis when a failing bank not yet insolvent needs to maintain open lines of credit with other financial institutions and to manage its balance sheet while achieving regulatory objectives. Bank resolution regimes must be designed not only to protect shareholders and creditors, but also to achieve other regulatory objectives that are vital for the efficient operation of the economy. Although the UK Banking Act 2009 provides a comprehensive framework for bank corporate restructuring and insolvency, it creates a mechanism to suspend corporate governance rules pre-insolvency and thus interferes with shareholder rights. This raises important issues under EU company law and the European Convention on Human Rights regarding the protection of property interests in a restructured bank. The article examines the special resolution regime of the UK Banking Act 2009, analyses the relevant issues of EU Company Law and related human rights law and suggests some legal principles to be applied in developing a special resolution regime.