Showing papers in "The Journal of Corporate Law Studies in 2004"
TL;DR: In this paper, the authors examined the relative advantages of each model and linked each model to a different type of corporation and argued that while the debtor-in-possession model suited the Berle-Means firm, whose ownership is widely dispersed, it is unfit for concentrated ownership firms.
Abstract: Firms undergoing reorganisation face various legal problems, all of which are derived from the uncertainty concerning the firm's actual value. The various claimants to the firm's value, creditors as well as equityholders, wish to exercise control over the managing of the firm in a manner consistent with their relative priority and risk preference. Under current bankruptcy law around the world, there are two leading models for governing a firm undergoing reorganisation. One model allows the incumbent management to remain in office as a debtorin-possession. The other mandates that an appointed trustee replace the management. This article examines the relative advantages of each model and links each model to a different type of corporation. The article argues that while the debtor-in-possession model suits the Berle-Means firm, whose ownership is widely dispersed, it is unfit for concentrated ownership firms. Reorganisation of such firms requires an objective trustee. The article continues and refines the co...
21 citations
TL;DR: In this article, the authors consider the underlying rationales of EC securities regulation and propose a proposal for how investor confidence may be safely promoted by the new pan-EC regime, in which the powerful influences of the EC's market construction imperative and its constitutional and institutional context, expand the role traditionally played by investor confidence beyond the strict regulatory context.
Abstract: This article considers the underlying rationales of EC securities regulation which, since the adoption of the 1999 Financial Services Action Plan, is fast emerging as a discrete and sophisticated regulatory regime for the EC capital market. In particular, it considers the regime’s growing reliance on the promotion of pan-EC investor confidence. EC securities regulation is placed in the context of the insights of behavioural economics which challenge the extent to which investor confidence is an appropriate objective for the new pan-EC regime. The powerful influences of the EC’s market construction imperative and its constitutional and institutional context, however, expand the role traditionally played by investor confidence beyond the strict regulatory context. Confidence may be an important device for deepening the Commission’s regulatory power and placing EC securities regulation on a more secure constitutional footing. A proposal is suggested for how investor confidence may be safely promoted by the new regime.
21 citations
TL;DR: In this paper, a consideration of employees' position within corporate governance structures clarifies their understanding of some of the most significant non-shareholding corporate stakeholding groups, such as unions.
Abstract: Employees are the most significant non-shareholding corporate stakeholding group. A consideration of their position within corporate governance structures clarifies our understanding of some of the...
14 citations
TL;DR: The European Company Statute as mentioned in this paper provides only a patchy set of uniform rules applying to the new legal form, the Societas Europaea or SE, most of them only partially and often leaving options open to Member States or to companies themselves.
Abstract: Following the skimming process that led to its final approval in October 2001, the European Company Statute provides only a patchy set of uniform rules applying to the new legal form, the Societas Europaea or SE. The Statute covers a limited range of issues, most of them only partially and often leaving options open to Member States or to companies themselves. Matters not covered by the Statute are governed by the law on public limited-liability companies of the Member State in which the SE has its registered office and central administration. The purpose of this article is to show that the very lack of a uniform regime on issues affecting a company's position (as prey or predator) in the market for corporate control may prove to be a key factor for the success of this new legal form. First, it is highlighted how the European Company may turn out to be an attractive vehicle for company law shopping within the EU. Then, it is showed that the absence of rules on shares, and to a lesser degree on legal capit...
13 citations
TL;DR: In this article, the authors consider the regulation of executive pay practices in listed companies in the European Union and the empirical evidence of pay practices, based on the FTSE Eurotop 300 membership's annual report for 2001, and place in the context of the dispersed ownership/blockholding ownership faultline which runs across EU corporate governance, and in light of recent EU initiatives, particularly the Commission's May 2003 Company Law Action Plan and the 2004 Consultation on Executive Remuneration.
Abstract: This article considers the regulation of executive pay practices in listed companies in the European Union and the empirical evidence of pay practices, based on the FTSE Eurotop 300 membership’s annual report for 2001. The analysis is placed in the context of the dispersed ownership/blockholding ownership faultline which runs across EU corporate governance, and in light of recent EU initiatives, particularly the Commission’s May 2003 Company Law Action Plan and the 2004 Consultation on Executive Remuneration. The outstanding feature of executive pay in the EU is the extent to which it reflects the interconnection between pay and corporate governance or ownership structures. Executive pay, regarded as a management incentive contract, is a key agency-cost control mechanism in dispersed ownership systems. Legal controls on pay are accordingly at their most sophisticated, in terms of promoting the adoption of an optimal contract for shareholders, in those EU Member States where dispersed ownership dominates. These systems also see the heaviest reliance in practice on high-powered, equity-based, incentive-driven pay contracts. In blockholding systems, controlling shareholders can, in theory, monitor management directly without the need for an incentive contract. Pay controls are accordingly less sophisticated and, as revealed by the FTSE Eurotop 300 evidence, the prevalence of high-powered equity-based incentive contracts is reduced. Different concerns arise, however, as to the protection of minority shareholders from controlling blockholders.
7 citations
TL;DR: In this paper, the authors examine the various theories put forward to explain poison pills and the empirical evidence to support these theories and conclude that it is not possible for regulators to adopt a monolithic approach in their treatment of takeovers.
Abstract: This article examines the various theories put forward to explain poison pills and the empirical evidence to support these theories. Such an examination leads to the conclusion that it is not possible for regulators to adopt a monolithic approach in their treatment of takeovers. An analysis of the common law approach to fiduciary duties including the recent Court of Appeal decision in Criterion Properties Plc v Stratford UK Properties LLC & Ors indicates a number of unresolved issues remain including a reluctance to interfere with the business judgment of the directors, a difficulty in identifying the purpose and consequences of an exercise of power and problems of enforceability. The Takeover Directive agreed in December 2003 which allows Member States to avoid implementing a prohibition on frustrating actions is viewed as an opportunity missed. While the City Code and Takeover Rules are particularly effective in regulating poison pills, they do not currently regulate actions taken prior to the time an o...
5 citations
TL;DR: In this article, the authors examine the structures, regulation and design of some common forms of retail financial product and show how these together constitute the terms upon which investment capital is both formed and then entrusted to institutional investors.
Abstract: In the UK today the pursuit of one policy objective—to increase the level of private savings and financial provision by devising simpler, cheaper and often tax privileged retail financial products—obscures and makes it yet more difficult to achieve another stated current policy objective—a more active role in corporate governance by institutional investors. This article sets out the evidence for this claim by examining the structures, regulation and design of some common forms of retail financial product and shows how these together constitute the terms upon which investment capital is both formed and then entrusted to institutional investors. It argues that those terms inevitably affect the level of corporate governance activity that such capital can give rise to.
5 citations
TL;DR: In this paper, the theoretical justification for directors owing a duty to their companies to take into account the interests of company creditors is examined, and a brief discussion of the doctrinal p...
Abstract: The article examines the theoretical justification for directors owing a duty to their companies to take into account the interests of company creditors. After a brief discussion of the doctrinal p...
4 citations
TL;DR: In this article, the authors discuss the critical role of costs and fees in initiating and maintaining derivative actions in the context of incentives to such litigation and propose three possible solutions to rectify the funding problem: making a mandatory requirement for the company to pay the costs of the action, rewarding the plaintiff with part of the proceeds of a successful action, and employing conditional fee agreements.
Abstract: This article is concerned with the critical role of costs and fees in initiating and maintaining derivative actions in the context of incentives to such litigation. First, it briefly explicates the economics of derivative action litigation. As part of this, the US rules on derivative action fees are examined. After rehearsing the common law recognition of the problems of the impecunious shareholder in the form of indemnity costs orders, it exposes major flaws in the operation of these costs orders. In response, three possible solutions to rectify the funding problem are considered: (i) making a mandatory requirement for the company to pay the costs of the action; (ii) rewarding the plaintiff with part of the proceeds of a successful action; and (iii) employing conditional fee agreements. These are examined and assessed.
4 citations
4 citations
TL;DR: In this article, the authors analyze the Financial Services Authority's response to revelations that investment banks have mismanaged conflicts of interest arising out of research analysts' recommendations in hot initial public offerings.
Abstract: This article critically analyses the Financial Services Authority's response to revelations that investment banks have mismanaged conflicts of interest arising out of research analysts' recommendations in ‘hot’ initial public offerings. The discussion is located within the context of international developments in relation to this issue and offers both theoretical and practical insights into the FSA's proposed reform measures.
TL;DR: In this paper, the authors propose that if there is to be effective co-operation between company directors and stakeholders to produce profitable business, developing trust between parties is essential, and good communication is vital in fos...
Abstract: If there is to be effective co-operation between company directors and stakeholders to produce profitable business, developing trust between parties is essential. Good communication is vital in fos...
TL;DR: In this article, the authors reviewed the latest reports of the Scottish and English Law Commissions and the English Law Commission's most up to date thinking on law reform within the field of the constitution, priority and enforcement of company charges granted by companies registered in Scotland or England and Wales.
Abstract: The aim of this article is to review the latest reports of the Scottish and English Law Commissions and the English Law Commission's most up to date thinking on law reform within the field of the constitution, priority and enforcement of company charges granted by companies registered in Scotland or England and Wales. The article assesses the recommendations and their effect from the viewpoint of the commercial law practitioner who desires closer integration between the laws of Scotland and England in this area.The terms of reference submitted to the Commissions are firstly evaluated. The Scottish legal requirements for the creation of company charges, or what are more accurately referred to as “rights in security” granted by companies will be considered. Such an analysis will involve an explanation of the “publicity principle” in Scots law in this particular context. The article then scrutinises both Law Commissions' recommendations, revealing that the English Law Commission's proposals are more expansiv...
TL;DR: In this article, the authors examine the regulation of trades in listed securities by external administrators (EAs), such as trustees in bankruptcy, liquidators, receivers, and administrators on the basis of private information.
Abstract: This paper examines the regulation of trades in listed securities by external administrators (EAs), such as trustees in bankruptcy, liquidators, receivers, and administrators on the basis of private information. We consider the economic policy issues associated with such trades. The principal considerations counsel in favour of taking a permissive approach. These are: the difficulties of associating trades with insider information, given the EA's necessarily short expected holding period, the asymmetric application of the insider trading prohibition to sales (rather than decisions not to sell), the market incentives not to misuse private information that apply to EAs, and the unlikelihood that the EA has monopolistic access to the information in question. We consider these considerations by reference to a number of hypothetical scenarios. The paper argues that the law should regulate the subject by coupling a broad exemption for EAs with a "goiod faith" proviso, a continuous disclosure obligation, and a requirement to sell "all or nothing" of a holding of listed securities.