Understanding Corporate Mobility
in the EU
Towards the Foundations of a European ‘Internal Affairs Doctrine’
Joseph A. McCahery and Erik P.M. Vermeulen
Berlin, 27 and 28 June 2007
The History of
Corporate Mobility in the EU
1973
-Different History, Culture, Language
-Real Seat Doctrine Prevails
-‘Pseudo-foreign’ companies
-NO Brussels Convention on
mutual recognition (1968)
Non-Mobility Equilibrium
The Lisbon-Agenda... How To Get There?
Minneapolis
Detroit
Delaware Inc.
Los Angeles
Houston
Miami
Comparison with the United States: The Internal Affairs Rule
(Judge-Made and Codified in Restatement)
EU Harmonizing Company Laws
1970s and 1980s
1st Dir.
2nd Dir.
68/151
77/91
3rd Dir.
4th Dir.
6th Dir.
7th Dir.
8th Dir.
78/855
78/660
82/891
83/349
84/253
11th Dir.
12th Dir.
Corporate Law
Disagreement
Corporate Law
Consensus
Mandatory approach
89/666
89/667
Facilitating approach
Dir. takeover bids
Dir. modification of 1st Dir. 68/151
1st Generation
2nd Generation
3rd Generation
4th Generation
Corporate Law Not Fully Harmonized; Mobility Not
Fully Realized
EU-Level Business Forms - The Societas
Europaea
“Foratis AG begins
trading in SEs”
“Registration Agents”
Costs
- Board
Composition
- One-tier
System
Corporate Governance
European
- Employee Participation
- Capital Requirements
- Reference to National
Company Law
- Cross-border Restructuring
- European Expansion and
Acceptance
The SE in Practice - More Mobility?
“Popular” in countries with rigid
companies laws and
widespread participation rights
Mostly established by conversion
No change of registered office and
seat of administration
“More effective” corporate
governance system - one-tier and/or
“international” board composition
Source: Adapted from information available at www.seeurope-network.org
Post-Centros Case Law:Incorporation
Mobility
UK Limited
The Future?
Registration Agents
Approx. 20,000
(1)
(2)
(3)
Centros
Überseering
Inspire Art
(4)
(5)
(6)
1997
1998 1999 2000 2001 2002 2003 2004 2005
Source: Adapted from Becht, et al, Where Do Firms Incorporate?
‘Round-trippers’
Costs (not the law)
Reform National
Corporate Laws
Disclosure Issues
with UK Limited
Financing Problems
First Bankruptcies
Does Europe Offer the Right Framework?
Corporate Mobility?
EU
Legislative
Measures
ECJ
Case-Law
The European Union
EU Legislative Measures are Incomplete
Directive 2005/56/EC on Cross-Border Mergers of
Limited Liability Companies does not cover
all types of companies
EU
Legislative
Measures
Fourteenth directive on seat transfer is
ECJ
still in the drafting
stage
Case-Law
ECJ moves faster
ECJ in Sevic - Harmonization Directives
are no precondition for corporate mobility
ECJ Case Law Is Interpreted (Too) Narrowly
ECJ Case law has eliminated many restrictions
to corporate mobility
However, member states tend to favour a
narrow andEU
strict interpretation of
the judgments
Legislative
Measures
Non-mobility equilibrium still prevails
More case law needed to eliminate “all”
restrictions
ECJ
Case-Law
One More Thing ....
Tax reasons are the main mobility “drivers” or “blockers”
Will the European Court of Justice “reverse” the Daily Mail
decision?
And extend its decision in Lasteyrie du Saillant to legal entities?
Conclusion
ECJ Case Law and EU Legislative Measures Complement Each Other
Post-Centros line of
Reasoning:
(1)
(2)
14th Directive (?)
Case Law
EU Legislation
Eliminate Tax
Barriers
Transfer of
Statutory Seat
Thank you!
e.p.m.vermeulen@uvt.nl
Restatement
Approach Proposal
Professor
Sonnenberger