COMPARATIVE COMPANY LAW AND
CORPORATE GOVERNANCE
Lectures on Company Law
Prof. Jukka Mähönen
October 2012
2
Lectures on company law
Jukka Mähönen: Comparative Company Law and
Corporate Governance
• Wed 10.10.2012 16–20 P722
• Thu 11.10.2012 16–19 P673
• Fri 12.10.2012 16–19 P673
Seppo Villa: Corporate Finance
• Tue 16.10.2012 10–13 P674
• Wed 17.10.2012 10–13 P722
• Thu 18.10.2012 10–14 (12.15 – 14:00 exam) AUD XII
(Main building)
• Re-exam day: public exam day 20.11.2012 Place: PI
Time: 09:00
3
Comparative company law and corporate
governance
Aims
• Theoretical basis of modern company law and
corporate governance: contract and agency
theory, governance models
• History of company law and corporate
governance and company law families
• General structure of EU company law
4
Comparative company law and corporate
governance
• Main features of corporate form (legal
personality, limited liability, residual rights,
separation of control and ownership, free
transfer of shares)
Literature
• Reinier Kraakman et al.: The anatomy of
corporate law : a comparative and
functional approach, 2nd ed., Oxford
University Press: New York 2009
5
Corporate Finance
Aims
• The structure of corporate finance
• The distinction between equity and loans
• Mezzanine finance: subordinated loans,
preferred shares
• The annual accounts
6
Corporate finance
• The doctrine of capital maintenance
• Distribution of funds
• Creditor protection: solvency and balance sheet tests
Literature
• Kraakman et al (2009)
• Seppo Villa: Creditor Protection and the Application of
the Solvency and Balance Sheet Tests under the
Company Laws of Finland and New Zealand
7
Theoretical basis
Mainstream corporate law paradigm
• Kraakman et al. (2009)
End of history of corporate law
• Henry Hansmann & Reinier Kraakman: The
end of history for corporate law. Georgetown
Law Journal, 439–468 (2001)
8
Theoretical basis
Critique against mainstream paradigm
• Adolf Berle & Gardiner Means: The Modern
Corporation and Private Property (1932)
• Luh Luh Lan & Loizos Heracleous: Rethinking
agency theory: The view from law. Academy of
Management Review, 294–314 (2010)
9
Mainstream paradigm
Emphasis on contracting and self-regulation
Basis on microeconomics: theory of the firm
• Nexus of contracts theory
• Principal agent theory
Shareholder primacy
10
Critique
Managerialism
• Expert management the corporate strategic centre in a
bureaucratic hierarchy
Stakeholder primacy
• Duty of managers and directors to take into consideration the
interests of non-shareholder constituencies having stakes in
the company as important as those of shareholders
Director primacy
• The board of directors a central, independent decision-maker
mediating competing stakeholder interests and allocating the
firm surplus among them
11
Important to remember
Long history of corporate law
• Roman law: familia, peculium, societas,
societas publicanorum
• Medieval law: societas, compagnia,
commenda, guilds
• Early modern time: great companies
• Dutch East Indian Company (VOC)
• English East Indian Company (EIC)
• Modern regulation
• ca 1850-
12
Historical theories on company law
Fiction theory
Organic theory
Aggregate theory
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Fiction theory
Company a state-created legal fiction only, without
substantial reality or own free will
• Public good
Basis: state concession
German variant: Friedrich von Savigny, Karl Puchta
U.S. variant: Darthmouth College v. Woodward (1819);
David Millon: Frontiers of legal thought I: Theories of
the corporation. Duke Law Journal, 201–262 (1990)
Influence: Stakeholder primacy
14
Organic theory
Company a real entity having a separate
existence from its shareholders
Company a naturally occurring being
German variant: Georg Beseler, Otto von Gierke
U.S. variant: Ernst Freund: The legal nature of
corporations (1897)
Influence
• Managerialism: Berle & Means (1932)
15
Aggregate theory
Company formed by voluntary private contracting
• Basis: contract theory
German variant: Rudolf von Ihering (interest theory)
U.S. variant: Victor Morawetz: Private corporations (1886),
Charles Beach: The Law of Private Corporations (1891)
16
Aggregate theory
Influence
• Shareholder primacy: Michael J. Jensen & William H.
Meckling: Theory of the Firm: Managerial Behavior, Agency
Costs and Ownership Structure. Journal of Financial
Economics, 305–360 (1976); Hansmann & Kraakman (2001)
• Director primacy: Margaret Blair & Lynn Stout: A team
production theory of corporate law. Virginia Law Review, 247–
328 (1999)
17
Company law regulation
contract law
• corporate agreement, by-laws, articles of association
etc.
specific company legislation
• legal personality
• limitations of stakeholder responsibilities
joint and self-regulation
• corporate governance codes
public supervision
• general: eg Companies House, Finnish Board of
Patents and Registration
• securities markets: eg. SEC, FSA
18
Comparative approach
Three legal families
• Anglo-American
• Continental European (French-Germanic)
• Scandinavian
Harmonization of EU company law
19
Comparative approach
Different views on the scope of company law
Relation to other branches of law
• contract law
• securities law
• labour law
• environmental law
• tax law
• administrative law
• basic and human rights
• four freedoms in the EC Treaty
Different kinds of corporate forms
20
Comparative approach
Typical corporate forms
• partnerships
• limited partnerships
• company limited by shares
• private (ltd, GmbH, SARL, SAS, ApS)
• public (plc, AG, SA, AS)
• cooperatives
• non-profit organizations
• civil law “foundations”
• cf. trust and its European counterparts
• charitable companies
• “associations”
21
European harmonization
Changes in British company law
• Convergence to Continental company law
”Americanization” of EU company law during
the last decade
22
French-German system
Civil law
• Emphasis on the legislator and jurisprudence
• Inefficient role of courts as rule makers
Debt finance
Emphasis on creditor protection
Weak shareholder rights against directors
 Strong dividend rights (substitution
hypothesis: weak shareholder protection is
compensated by dividends)
23
French-German system
Example: German Aktiengesellschaft (AG)
• Two-tier system
• Vorstand (”board”)
• Aufsichtsrat (”supervisory board”)
• Strong creditor protection
• Hausbank system
• Growing importance of securities markets
• Kodex
24
Scandinavian system
French-German basis
Legal realism
Courts as law-makers
Stronger role of equity financing than in French-German
system but weaker than in Anglo-American world
Modern legislation
• Norway 1997
• Sweden 2005
• Finland 2006
• Denmark 2009
25
Scandinavian system
Points to be remember
• Multiple voting rights
• Cf. Germany
• Equal treatment of shareholders
• Cf. Anglo-American law
26
Anglo-American system
Statutory law like in Continental and Scandinavian
countries
Common law: courts as law-makers
Codification of case law in statutory law
Equity financing
Strong role for securities markets
Strong investor protection
• Strong shareholder rights against directors
27
Anglo-American system
UK: 2006 Companies Act
• SME approach
• Enlightened value maximization
US
• State legislation
• Fiduciary duties and business judgment rule
• Corporate law competition: Delaware
28
”Americanization” of European law
Recent trends in EU company law
National law: the new 2006 Finnish Companies
Act
• ”Revlon duties”: directors’ duties in takeovers
• Business judgment rule in duty of care
29
EU company law
4 Regulations
• European Economic Interest Groupings (EEIG,
1985)
• European Companies (SE, 2001)
• IAS/IFRS Standards (IAS Regulation, 2002)
• European Cooperative Societies (SCE 2003)
30
EU company law
13 Directives
“Old” directives
• Disclosure (1st Dir., 1968)
• Capital (2nd Dir., 1977)
• Merger (3rd Dir., 1977)
• Annual Accounts (4th Dir., 1978)
• Division (6th Dir., 1982)
• Consolidated Accounts (7th Dir., 1983)
• Auditors (8th Dir., 1984)
• Branches (11th Dir., 1989)
• Single-Member Companies (12th. Dir., 1989)
31
EU company law
“New” directives  US impact
• Takeovers (13th Dir., 2003)
• Transparency (2004)
• Cross-border mergers (10th Dir. 2005)
• Auditing (new 8th Dir, 2007)
• Shareholders’ rights (2007)
32
European corporate forms
European economic interest grouping (EEIG)
• primarily a cross-border
• partnership or ‘joint venture’
• depending on the applicable law – eg. Finnish law: rules
of a partnership
European public company (SE)
• cross-border public company limited by shares
• Finnish law: rules of a plc
European cooperative society (SCE)
• cross-border cooperative society
• Eg Finnish law: rules of a cooperative society
European private company (SPE)
33
General features of limited liability law
a limited liability company a very young phenomenon
classical company laws 1855-1900
•
•
•
•
•
Britain 1855
France 1867
Germany 1871-91
Sweden and Finland 1895
U.S. States (New York, New Jersey, Delaware) end of the
19th Century
a recognizable company form in all industrialized countries
by 1900
34
Main features
full legal personality
limited liability
recidual rights
separation of control and ownership
free transfer of shares
35
Legal personality
Enables
• separation of corporate assets and corporate creditors
from shareholders’ assets and liabilities (asset
partitioning)
• Protection of corporate assets from shareholders’
creditors (entity shielding)
See Henry Hansmann & Reinier Kraakman & Richard
Squire: Law and the Rise of the Firm, Harvard Law
Review), 1333-1403 (2006)
36
Legal personality
Three elements
• Protection of creditors from shareholders
• Protection of company from shareholders’ creditors
• Protection of corporate creditors from shareholders’
creditors
Weak forms
• Partnership
Strong forms
• Limited liability company
37
Legal personality
State intervention necessary to achieve
protection of corporate assets from
shareholders’ creditors
Transaction costs!
• Negotiations between every shareholders and
every creditor
• Moral hazard!
• Free transfer of shares
• Asymmetric information
38
Pros
Reduction of potential creditor information costs
reduction of creditor monitoring costs
reduction of management agency costs
reduction of administrative costs of bankruptcy
Reduction of amount of inefficient bankruptcies
• Protection of going concern value
39
Pros
Enables capital accumulation and investment
diversification
Increases transfer of shares
• Cf partnership
• Shareholder’s creditor
• Right to corporate assets
• Right to share
40
Cons
Debtor opportunism and moral hazard
• Risk premium
• Shareholders’ creditors!
Enforcement costs
A sophisticated bankruptcy system
• Weak legal personality
41
Cons
Illiquid investments
• Dispersed ownership
• Free transfer of shares!
Exploitation by controlling persons
• Opportunistic behaviour of controlling
shareholders and directors
• Problem of private benefits
42
Private benefits
Pecuniary private benefits v non-pecuniary private benefits
• See Ronald J. Gilson: Controlling Shareholders and
Corporate Governance: Complicating the Comparative
Taxonomy, Harvard Law Review, 1641-1679 (2006)
Pecuniary benefits: ”stealing” (eg tunnelling)
Non-pecuniary benefits: do not reduce corporate value
• Political influence
• Societal status
43
Legal tools
Fiduciary duties: directors and controlling
shareholders
Equal treatment
Derivative suits
Market for corporate control
44
Limited liability
Owner shielding
• Shareholders protected from corporate
creditors
• Not very important
• Cf. partnership
• Not necessary for free transfer of shares
Directors’ competence: agency
45
Limited liability
Not problematic for creditors
• Contractual protection – eg control covenants
• Risk premium
Weak creditors and non-contractual creditors
• Free-riding
46
Other
Recídual rights
• Against opportunistic partial liquidation before
total liquidation
Separation ownership and control
• Agency problem
Free transfer of shares
• Legal personality
47
Main features – exceptions
recidual rights belong to the shareholders v. charitable
companies
full legal personality v lifting the corporate veil
• moral hazard
free transfer – exceptions for private companies
48
Main features – exceptions
Separation of control and ownership: lots of
variations
• shareholders meeting v board of directors
• board of directors v general manager
• board of directors v supervisory board
one tier – two tier – one and a half tier – two and
a half tier systems
49
Historical developments
Four basic models
• manager-oriented
• labour-oriented
• state-oriented
• shareholder-oriented
50
Manager-oriented model
United States ca 1930-1970
power vested with independent professional management
best possibilities to govern the company for the benefit of
the society
• cf. corporate social responsibility
if no control – danger of opportunistic behavior
• principal agency problem
51
Labour-oriented model
the most important stakeholder: the employees
(=trade unions)
Germany after WWII
• Mitwirkungsrecht
• in AG supervisory boards (Aufsichtsrat)
52
Labour-oriented model
EU
• proposal for the 5th directive 1983
• British resistance
• see however directives attached to the SE and
SCE Regulations and cross-border directives
on employee participation
53
State-oriented model
direct government intervention on firms’
governance
control vested with the state bureaucracy
instead of owners or management
France and Japan after WWII
54
State-oriented model
Tools
• direct state ownership
• regulation of foreign investments
• licence systems and other restrictions for
competition
• criminal and adminstrative law sanctions (cf.
private law sanctions)
55
Shareholder oriented model
In the United States, from the 1960s
Other parts of the world, from the 1980s and
1990s
56
Why dominant?
US dominance in the global markets
weakening of German and Japanese economics
critique against state ownership
financial reporting by quarters instead of fiscal years
critique against public regulation from the 1980s
57
Shareholder primacy
Main idea shareholder primacy: the
shareholders have a special role among the
corporate stakeholders
emphasis on contracting and self-regulation
theoretical basis: principal agent theory
58
Theoretical basis
Theory of the firm (Akerlof, Fama, Jensen, Meckling)
Agency theory
• Principal-agent theory: problem of asymmetric information
• Incomplete contracting theory: problem of transaction costs
Origins in large profit-making firms
• How to govern the relationships between management and
shareholders?
59
Principal agency theory
Main features
• Agency
• Asymmetric information
• Incomplete contracting
• Moral hazard (”opportunism”)
Legal tools
• Fiduciary duties
• Transparency
60
Principal agent theory in a company
A firm is nexus of contractual input and output
relations between the firm’s stakeholders
From this point of view, a firm does not have
”owners” in the traditional sense
Shareholders input only one among other
contractual parties, eg creditors
61
Special role of shareholders
Shareholders carry the residual risk on the firm
The most vulnerable stakeholder group for
management opportunism
The most vulnerable of all: the minority
shareholders
• Management opportunism
• Controlling shareholder opportunism
How to prevent opportunism?
62
Principal agent relationship
The board of directors: agents of shareholders
monitoring the management
The board must be seen as the agent for all
shareholders and shareholders only
Directors’s duties to and only to shareholders
• Fiduciary duties: duty of care and duty of
loyalty
Company interest = Shareholder interest
63
Division of control rights
In a company with no controlling shareholders: the
directors ”own” the company by controlling it without
hearing the investors
• “director primacy”
New interest conflict between the directors and the
shareholders: the directors have the control but not a
residual risk  no incentives to maximize the residual
Other two interest conflict relationships
• Controlling sharreholders v the minority shareholders
• Shareholders v creditors
64
Corporate governance
How to solve the interest conflicts between
shareholders v directors and controlling
shareholders v minority shareholders
How the shareholders ensure that the directors
serve shareholders’ without opportunism?
How the minority can trust the controlling
shareholders?
65
Corporate governance
Problems to be solved
• Information asymmetry: Efficient monitoring?
• Transparency
Tools
• Legal rules
• Self-regulation
• Shareholders’ decisions
• Information duties
66
Main question: How to monitor?
The essential role of intermediaries
• Auditors
• Analysts
• Rating agencies
Duty to verify agent information on behalf of
principals
Moral hazard
• Enron
• Financial crisis
67
Importance of information
Transparency rules
Balances information asymmetry between
principals and agents
Enables efficient markets for corporate
governance
68
Creditor protection
Primarily an insolvency law not company law
problem
Continental and Nordic company law: main
focus in company law – efficient?
Change of focus in company law reforms:
• Creditor protection  shareholder protection
69
Capital maintenance rules
Distribution rules
• Balance sheet tests
• Solvency tests
Minimum capital rules
Maintenance of going concern value
• Prevents partial liquidations nad so moral hazard
70
Protection of other stakeholders
Distribution rules
Lifting the corporate veil
Labour law
Environmental law
Insolvency law
71
Example: Finland
1978 Companies Act: State-oriented model
State-controlled firms
Licencing systems
Restrictions to foreign ownership
Employee representation: labour law
72
Example: Finland
2006 Companies Act: Shareholder primacy
Investor protection
Freedom of contract
Creditor protection
Ex post protection of shareholders
73
Critique towards shareholder primacy
Director primacy
Stakeholder primacy
74
Director primacy
The company is a a nexus of firm-specific investments
• complex productive activity involving many parties
where the resulting output is generally neither separable
nor individually attributable to original contributors =
“team production”
Purpose of the company
• maximize total corporate returns
• satisfy group-specific stakeholder returns so that
commitment to team production is sustained
75
Director primacy
The board mediates the competing interests of different
team members
• The company itself the principal
• Duty of the board to maximize the sum of all riskadjusted returns enjoyed by the team members
• Directors’ fiduciary duties towards all risk-bearing
stakeholders: business judgment rule
Problems?
76
Stakeholder primacy
The board and the management balance the
needs of all corporate constituents =
stakeholder community
“Communitarianism”
Stakeholders’ representation rights
Problems?
77
Corporate social responsibility
Sustainable development
• Economic responsibilities
• Environmental responsibilities
• Social responsibilities
Test of theories
• Shareholder primacy
• Director primacy
78
Corporate social responsibility
Shareholder primacy
• ”Enlightened” value maximization: Long-term interest of the
shareholders
• Specific corporate law duties towards stakeholders,
communities, environment?
Director primacy
• The board mediating the conflicting interests of team
members
Communitarianism
• Public interest
Example: Human right risks
79
Human right risks
Examples
• Legal risk from human right violations
• Risks from tarnishing brands and reputation
• Operational risk from weakening competitiveness
Can shareholder primacy solve these problems?
80
Example of European company law: Finland
General aspects of Finnish corporate law
• National commercial corporate forms
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•
•
•
•
Partnership
Limited partnership
Co-operative society
Private company
Public company
• European corporate forms
•
•
•
•
European economic interest grouping (EEIG)
European company (SE)
European co-operative society (SCE)
Not very popular in Finland, you may say …
81
Background
General aspects
• No limited liability parnership
(”Kommanditaktiengesellschaft”) – problem for private
equity/venture capital
• Basically same rules for both private and public
companies
• No ”GmbH”/”SARL”/”SAS” corporation forms
• All companies governed by the Finnish Companies Act of
2006 (FCA)
• Tax rules create incentives to use private company for
all kinds of business
• Problems for medical, law and accounting firms
82
Background
History of Finnish corporate law
• Partnerships and limited partnerships based on
medieval Continental practices
• Partnership law codified in the Commercial Code of 1734
• Limited partnership law codified in the Limited
Partnerships Decree of 1864
• Now both codified in the Partnerships Act of 1988 (FPA)
• Co-operative law based on Swedish models
• Especially Co-operatives Act of 1954
• New Co-operatives Act of 2001 influenced by Companies
Act of 1978
83
Background
History
• First Companies Decree of 1864 based on French Code de
commerce of 1807
• Concession principle
• Companies Act of 1895 based on Swedish, German and
French law
• Registration principle
• Companies Act of 1978 heavily based on Swedish
Companies Act of 1975
• Based on Swedish Companies Act of 1944
• Implementation of EC Company Directives in 1997
• Different solutions in Sweden and Finland: end of copying
Swedish law
• Why?
84
Finnish Company Law Theory
Based traditionally on German and Swedish doctrine
• Fiction theory
• Organic theory
Change in the paradigm in mid-1990s
• Law and economics approach
• Theory of the firm
• Principal agency theory
• Shareholder value maximization
”Americanization” of Finnish corporate law academia
85
Change in the markets
Great depression in the early 1990s
Bank crisis
• Diminishing influence of banks in Finnish listed companies
Finnish securities markets opened
• European Economic Area
• Barriers to hinder foreign investments broken down
• Reform of Finnish Securities Markets Act
From Hausbank system to Berle & Means companies
• Dispersed international ownership in many major listed
companies
86
Change in the Legal Structure
Member of the EEA in 1994
Member of the EU in 1995
Implementation of EC company law
Need for total evaluation of Finnish company law
Result: Companies Act of 2006
87
Goals of the FCA
Adaptation in changes in int’l cross-border
financial markets
Changes in the economic environment of
Finnish firms: towards competitive markets
How to reach these goals? Totally new and
competitive Companies Act: Race to the top
88
Goals of the FCA
More possibilities for Finnish firms both domestically and
internationally
Effective protection to minority shareholders and creditors
Suitable for SMEs
• Decrease of minimum share capital from 8,000 euros to 2,500
euros
Answers to challenges created by changes in legal environment
• Especially the IFRS
89
How to reach the goals?
Less and lighter formalities
Principle-based approach
More emphasis on freedom of contract
On the other hand: idea of the Companies Act as a
standard form contract
• Comprehensive collection of non-mandatory default
rules
• Theoretical background: firm as nexus of contracts
(Jensen & Meckling)
90
How to reach the goals?
Change in the ideology of minority and creditor
protection
• From ex ante approach to ex post approach
• From invalidity to damages
Modernization of legal language
91
Changes in practice
However, not a revolution but more fine-tuning
Revising bad written law
• Division rules
Codifying best practices
• Fast and easy incorporation
New possibilities, e.g., for M&As
• Triangular mergers
• Change of corporate form
• Company  partnership
• Company  limited partnership
• Company  co-operative
92
Principle-based approach
Difficult principal agency problems solved used
by principles
• Discretion of shareholders (FCA 1:9): freedom
of contract
• Purpose of the company (FCA 1:5):
shareholder value
• Equal treatment of shareholders (FCA 1:7)
• Fiduciary duties (FCA 1:5)
Interpretation: Towards U.S. law
93
Discretion of shareholders
Right to deviate the default rules by using
articles of association
• Not the mandatory creditor protection rules
Unanimous shareholders can
• deviate non-mandatory law and articles of
association
• act in writing instead of holding general
meetings
94
Shareholder value
Idea of ”enlightened” shareholder value
maximization
• Michael Jensen
• Cf. The UK Companies Act of 2006
Exception when the company is on sale: Revlon
duties
Problem: How to implement corporate social
responsibility?
95
Fiduciary duties
Duty of care
Duty of loyalty
Business judgment rule
Clearest sign of direct U.S. influence in the FCA
96
Minority protection
Equal treatment of all shareholders
Right for derivative suit for all shareholder when
the principle is grossly violated
In other cases: 10 % minority
No right for indirect loss (no incentive for
opportunism)
97
Minority protection
On the other hand: possibility to restrict the right of the
company to damages from directors, the CEO,
shareholders and auditors by a provision in the articles
of association (FCA 22:9)
Strict limitations for the provision
• Adaptation of the provision requires shareholders’
unanimity
• Does not cover violations of mandatory rules of the FCA
(creditor protection rules)
• Does not cover losses caused deliberately or through
gross negligence
98
Changes in finance and distributions
Default rule: shares without par value (FCA 3:5)
• Par value can be introduced by articles of
association: freedom of contract
Solvency test in distributions (FCA 13:2)
• Balance sheet test (FCA 13:5) required by the
Capital Directive
99
Corporate governance
One tier system as a general rule
• Negative attitudes towards supervisory boards
• Too negative? Alternative for board committees
American way in nominating board member candidates for
the general meeting
• Nomination committee of the board
However, important exceptions use the Swedish model
• Nominated by the controlling shareholders
• E.g., the State-controlled listed companies
100
Is the new law a success?
Who knows – but yearly incorporations have
been increased by 60 % after the new law was
introduced
83 % of the new companies without par value
101
Challenges
Still need for more flexibility for SMES
• Problems from one law fits for all ideology still exists
How to interpret
• the duty of loyalty?
• the business judgment rule?
• the solvency test?
Special problems in takeovers
• What kinds of poison pills are applicable?
• Interpretation of fiduciary duties of the directors of the
target company
• Helsinki Takeover Code
102
Challenges
No clear doctrine on
• piercing the corporate veil
• fiduciary duties of the controlling shareholders
No case law yet
103
Challenges
But the most important one
• No clear picture of the future of EU company
law
•
•
•
•
Reform of capital maintenance rules?
One share one vote principle?
New European corporation forms?
Total right for transfer of seat?
• Cartesio pending in the ECJ
• Race to the top or race to the bottom?
104
Corporate governance in Finnish law: Comparison
Partnerships
Limited partnerships
Limited liability companies
Cooperatives
105
Partnerships and limited partnerships
no statutory organization models in FPA
• the partners have a right to agree on the
organization
each partner with unlimited liability, in that capacity, has a
right and a duty to act
partners with unlimited liability have a veto-right
actions affecting the basis of collaboration
• unanimity (limited partners included)
106
Limited liability companies
Separation of powers
• General meeting
• Management
• Board of directors
• Managing directors (optional)
• Supervisory board (optional)
107
Limited liability companies
Board of directors
• Mandatory
• All corporate matters other than those
vested in the hands of the shareholders
at a general
meeting
• Fiduciary duties
• Business judgment rule
108
Limited liability companies
General meeting
• Only matters specifically mentioned in the CA
• Transfer of powers of the directors
• Articles of Association
• Unanimous shareholders in casu
109
Limited liability companies
Optional organs
• Supervisory board
• if so stipulated in the Articles
• Managing director
Two- or three-tier management affects
the division of powers between the
organs responsible for the
management
110
Limited liability companies
Finnish corporate governance code 2008
• Listed companies
• Board committees
• Audit committee
• Nomination committee
• Remuneration committee
111
Cooperatives
Approximately similar to a company
Meeting of the Members
The by-laws may transfer the powers to a body
called the Representatives
Default rule: one member-one vote
Board of directors
Managing director (optional)
Supervisory board (optional)