To what extent is EU company law harmonized? This essay first makes the point that still little progress has been made in the direction of company law uniformity within the EU. It then argues that, even leaving aside the question of whether it would be desirable to have a uniform EU company law, that outcome is simply impossible to achieve, due to interest group resistance and the variety in national meta-rules. Yet the essay concludes that, in a narrow meaning, European company laws have been indeed harmonized: European Member States company laws fit together, which may well be what harmonization, not only etymologically, is all about.

A Harmonized European Company Law: Are We There Already?

The freedom of establishment for companies (Articles 43 and 48 EC Treaty) includes the right to choose the company's seat in any Member State of the EC. However, in recent years, the European Court of Justice (ECJ) seems to have interpreted those articles as being relevant only to the recognition of foreign companies, whereas the right to leave the company's country of incorporation has not come within the scope of this freedom. The purpose of this paper is to question this distinction between "departure" and "arrival". It is argued that the ECJ's point of view is inconsistent in itself, creates logical problems and is incoherent in light of its interpretation of other fundamental freedoms. Arguably, the Court has created a "trap" for itself by insisting on the differentiation between "exit" and "entry" and by putting much effort into maintaining this differentiation over the last years. The article ends with an appeal to reassess the application of the freedom of establishment to companies and to find the courage to overcome the artificial differentiation.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1085544_code836081.pdf?abstractid=1085544&mirid=2

No Freedom of Emigration for Companies

The European Court of Justice’s landmark decision in Centros was heralded as creating the preconditions for a vibrant market for incorporations in the EU. In practice, however, today’s corporate landscape in Europe differs little from that of the late 1990s. Very few large companies have made use of their ability to subject themselves to the company law of a Member State in which they are not also headquartered, and there are few signs suggesting that a ‘European Delaware’ will emerge in the near future. To the extent that Member States have engaged in competitive law-making, this has largely been confined to minimum capital requirements and rules affecting the ease of the incorporation process—areas concerning primarily micro-companies. We argue that the modest effect of Centros is not only a function of limited economic incentives to engage in regulatory competition and regulatory arbitrage, but also of the fact that the applicability of large sections of relevant laws governing corporate behaviour is determined by real seat-like connecting factors which render regulatory arbitrage more difficult. We analyse the boundaries between the lex societatis and neighbouring legal areas, notably insolvency and tort law, and find that the body of rules regulating a company’s outward-facing activities, as opposed to its internal affairs, is largely removed from regulatory arbitrage. It therefore seems likely that the potential benefits of selecting the applicable company law, while remaining subject to a cocktail of other, equally relevant rules, are sufficiently small to be regularly outweighed by the costs of a complex and non-standard corporate structure that is necessary to exercise free movement rights.

The illusion of motion: corporate (im)mobility and the failed promise of centros

The European Commission (EC) is currently examining methods to increase the effectiveness of corporate governance disclosures. This article examines whether the Credit Rating Agencies, both on account of their influence within the marketplace and also their methodological approach to rating “Governance”, may have a greater role to play in the European Commission achieving those particular objectives This article is based upon a normative methodology, upon which the issue is contextualised and a proposal is put forward regarding a methodological alteration that can be instituted by the credit rating agencies. The paper finds that the credit rating agencies may have a much greater role to play in meeting the objectives of the EC. Whilst the EC is focusing upon regulatory monitoring, the paper finds that there is a potential for a more efficient model within which the credit rating agencies adapt their methodologies to include ‘corporate governance disclosure’ into their rating processes. In presenting the idea that the “comply or explain” principles put forward by the EC are proving to be somewhat ineffective, the paper contributes to the field by suggesting there are private endeavours which may add a sense of impact to disclosure proceedings, rather than the purely public regime being envisioned.

/pdf/can-credit-rating-agencies-play-a-greater-role-in-corporate-4k6bmtstw0.pdf

Can credit rating agencies play a greater role in corporate governance disclosure

The freedom of establishment is an expression of the Internal Market. On the one hand, the EU tries to strengthen the Internal Market, but on the other hand, Member States have a fear to lose their national control, making them eager to restrict the free movements granted by the Internal Market doctrine. The contradiction becomes visible in regard to the cross-border movement of companies in the EU.

Due to the lack of harmonization in the area of cross-border movement of companies, the CJEU had to take over the role of interpreting and harmonizing the law. The cross-border movement of companies was subject to several cases in front of the CJEU where the Court distinguished between emigration and immigration cases, which were not comparable. While immigration cases were covered by the freedom of establishment, cases of emigration were governed by the national law of the home Member State. The Court’s judgements were not stringent in regard to the interpretation of the freedom of establishment. A liberal interpretation of the freedom of establishment was only applicable in immigration cases, while the Court applied a narrow definition in emigration cases. The differentiation lacks a convincing argumentation.

Until Polbud, it was questionable whether companies were allowed and if yes, under which conditions, to transfer their registered seat to another Member State without changing their main place of business. Polbud put an end to the discussion and allowed the sole transfer of the registered seat even without any economic link to the host Member State. The freedom of establishment also includes a freedom of choice of the applicable law, allowing companies to re-incorporate in their Member State of choice even after they were initially incorporated in a different Member State.

The freedom of choice of the applicable law can be used by British companies who are affected by Brexit if the UK leaves the Internal Market. Companies, that are only incorporated in the UK, but have their real seat elsewhere in the EU, are after Brexit not per se accepted as a valid company. They can neither refer to the freedom of establishment nor to the principle of mutual recognition. After the UK will leave the Internal Market, these companies will be governed by the national laws of each Member State. The new freedom gained by the Polbud judgment helps companies to exit the UK before Brexit to still be a part of the Internal Market and be able to be subject to the freedom of establishment. A new Directive on cross-border conversions of companies proposed by the European Commission in Spring 2018 could give companies, if implemented on time, a legal certainty for their cross-border movement that Polbud is not able to provide.

/pdf/the-long-path-to-a-broad-reading-of-the-freedom-of-1w9wwxdo8s.pdf

The long path to a broad reading of the Freedom of Establishment and its impact on the Brexit era

Taking a text, cases and materials approach, de Luca's successful textbook remains the only offering for students of European company law, and has been thoroughly updated in this new edition. Chapters have been expanded to cover the latest legislation and directives on cross-border mergers, the use of digital tools, and cross-border insolvency, while figures and graphs have been introduced to help illustrate complex processes and relationships. Clearly differentiated explanatory textboxes from the first edition have been revised, and allow students to quickly identify sources such as EU legislation, official documents and excerpts from scholarly papers. The book explores a diverse range of topics, from what European company law is, to the structure of the Societas Europaea Statute, capital markets and takeover law. It continues to be an essential resource for the growing number of graduate courses in European company law, European business law, and comparative corporate law.

European Company Law

The Origins and Future of European Company Law

Taking a text, cases and materials approach, this is the first and only student textbook on European company law, providing an insight into the subject and shedding light on its future development. Textboxes for explanatory commentary, cases and materials - such as EU legislation, official documents and excerpts from scholarly papers - are clearly differentiated from the text, allowing the student to quickly identify sources. Each chapter also includes suggestions for further reading. Structured in seven parts, the book explores a diversity of topics, from what European company law is, the common rules for establishing, financing and accounting a company, and corporate governance, to the structure of the Societas Europaeca Statute, EU company law directives, capital markets and takeover law, and insolvency. An essential resource for the growing number of graduate courses on European company law, European business law, and comparative corporate law.

Nicola de Luca

Papers

European Company Law

The Origins and Future of European Company Law

European Company Law: Text, Cases and Materials

TFEU Provisions on Company Law

The Right of Establishment