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Understanding Corporate Mobility in the EU

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. Different History, Culture, Language

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Understanding Corporate Mobility in the EU

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  1. 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

  2. The History of Corporate Mobility in the EU • Different History, Culture, Language • Real Seat Doctrine Prevails • ‘Pseudo-foreign’ companies • NO Brussels Convention on • mutual recognition (1968) 1973 Non-Mobility Equilibrium

  3. 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)

  4. EU Harmonizing Company Laws 1970s and 1980s Mandatory approach 3rd Dir. 78/855 4th Dir. 78/660 6th Dir. 82/891 7th Dir. 83/349 8th Dir. 84/253 Corporate Law Consensus 1st Dir. 68/151 2nd Dir. 77/91 11th Dir. 89/666 12th Dir. 89/667 Facilitating approach Corporate Law Disagreement Dir. takeover bids Dir. modification of 1st Dir. 68/151 4th Generation 3rd Generation 1st Generation 2nd Generation Corporate Law Not Fully Harmonized; Mobility Not Fully Realized

  5. EU-Level Business Forms - The Societas Europaea “Foratis AG begins trading in SEs” “Registration Agents” • Board • Composition • One-tier • System Corporate Governance Costs European • Employee Participation • Capital Requirements • Reference to National • Company Law • Cross-border Restructuring • European Expansion and • Acceptance

  6. 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

  7. Post-Centros Case Law:Incorporation Mobility UK Limited The Future? Registration Agents Approx. 20,000 ‘Round-trippers’ Costs (not the law) Reform National Corporate Laws Disclosure Issues with UK Limited Financing Problems First Bankruptcies Überseering Inspire Art Centros 2005 1997 1998 1999 2000 2001 2002 2003 2004 Source: Adapted from Becht, et al, Where Do Firms Incorporate?

  8. Does Europe Offer the Right Framework? Corporate Mobility? EU Legislative Measures ECJ Case-Law The European Union

  9. EU Legislative Measures are Incomplete Directive 2005/56/EC on Cross-Border Mergers of Limited Liability Companies does not cover all types of companies Fourteenth directive on seat transfer is still in the drafting stage ECJ moves faster ECJ in Sevic - Harmonization Directives are no precondition for corporate mobility EU Legislative Measures ECJ Case-Law

  10. 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 and strict interpretation of the judgments Non-mobility equilibrium still prevails More case law needed to eliminate “all” restrictions EU Legislative Measures ECJ Case-Law

  11. 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?

  12. Conclusion ECJ Case Law and EU Legislative Measures Complement Each Other 14th Directive (?) Restatement Approach - Proposal Professor Sonnenberger Post-Centros line of Reasoning: Eliminate Tax Barriers (2) Transfer of Statutory Seat EU Legislation Case Law Thank you! e.p.m.vermeulen@uvt.nl

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