The European Commission recently opened a public consultation to collect input from stakeholders on problems in company law, gather evidence of such problems and ask their views on possible solutions on how to address the problems at EU level. The consultation focuses on the use of online tools throughout the companies’ lifecycle, the cross-border mobility of companies (again) and (the need for) conflict-of-law rules for companies (a recent study on the law applicable to companies, can be consulted here). Continue reading “EU company law: public consultation on rules on digital solutions and efficient cross-border operations”
Zohar Goshen and Richard Squire develop a new model for corporate governance in the Columbia Law Review
In a recently published papaer (here and here), commented on the Oxford Business Law Blog, a new theory of corporate governance is offered, referred to as the principal-cost theory. The theory challenges the theoretical foundations of the traditional agency-cost theory, in particular their one-size-fits-all policy recommendations.
The authors claim that the principal-cost theory demonstrates that the governance structure reducing control costs varies by firm. Lawmakers therefore should avoid one-size-fits all solutions. Rather they should seek to grow the menu of governance-structure. Accordingly, each firm could establish a governance mechanism adapted to its specific needs.
Does that mean that the agency-cost theory should be neglected from now on? Not necessarily. According to the authors, agent costs and principal costs are two sides of the same coin:
“Any reallocation of control rights between shareholders and managers decreases one type of bust, but will increase the other, The rate of substitution is firm-specific, driven by factors such as business strategy, industry, and the personal characteristics of the key parties.”
Only time will tell whether this theory of principal costs marks the end of an era dominated by a uniform theory of “good” corporate governance.
Dari-Matiacci, Gelderblom, Jonker & Perotti in the Journal of Law, Economics & Organization on the Dutch East Indies Company (VOC)
In a recent article, published in the Journal of Law, Economics & Organization (the article can be consulted here), DARI-MATIACCI, GELDERBLOM, JONKER and PEROTTI describe the emergence of the corporate form during the 17th century. In doing so, they put important insights from other authors (HANSMANN, KRAAKMAN and SQUIRE, click here and BLAIR, click here) in an historical perspective. Professor DARI-MATTIACI, one of the authors, held in 2015 at the KU Leuven the first Heremans Lecture on “The new economics of property rights. Unlocking the fundamental features and the historical emergence of the business corporation “, discussing a draft of this article.
Their research shows the corporate form to be a legal innovation, meeting the practical needs of oversees trade and appearing first in the Dutch East India Company (VOC). The partnership form and contractual commitments of capital did not provide the durability needed for oversees trade with Asia at the end of the 16th century. Continue reading “Lessons from history: the emergence of the corporate form”
A post by guest blogger Vincent Chantillon
Academics tend to say that you can’t have your cake and eat it too, yet this is what Evan Spiegel and Robert Murphy did with Snap a few months ago. Continue reading “Not all shareholders are created equal – Snap goes public with non-voting stock”
ECJ judgement of April 5th 2017
Two Italian companies did not pay their VAT debt which amounted to over a million euro. In addition to a tax penalty for the companies, their legal representatives were prosecuted in their personal capacity on the ground that they failed to fulfill their responsibility to pay the VAT. The representatives protested, arguing that this would breach the ne bis in idem-principle, guaranteed by article 50 of the Charter of Fundamental Rights of the EU.
One of the highlights of 6 months of Corporate Finance Lab was the mention of the Lab by the famous insolvency scholar Professor Bob Wessels (Leiden) as one of the blogs he follows, alongside the Oxford Business Law Blog, the blog by Professor Geert Van Calster (Leuven and Monash), the International Litigation Blog en Leiden Law Blog.
Some notable posts in English include:
- Real seat by any other name would smell as sweet? Does the “real seat” move from corporate law to insolvency law?
- Our own private Delaware: the ‘partnership en commandite’ A 12th century corporate form as inspiration for legislative reform.
- Good faith in contractual dealings: abstract versus concrete Common law vs civil law.
- An ‘entity’ or not an ‘entity’, that is the question. The Trust and “Centros”.
- New German rules on Group Insolvency Inspiration from the mother of all group law.
- Everybody loses … except the lawyers Perverse incentives?
- When the Going Gets Tough, the Shareholders Get Going Shareholders during financial crisis.
- Distributions to shareholders: inspiration from the ‘partnership en commandite’? Why a dividend should make you feel uneasy.
- Pre-insolvency proceedings, normative foundation and framework A rescue culture gone rogue?
- You can’t have your cake and eat it too: on debt as equity Equitable subordination of shareholder debt?
- What are the duties of a shareholder? Corporate interest und kein Ende.
- In the meantime in the Netherlands Dutch Corporate Governance.
- Delaware halts the eruption of M&A litigation in the Volcano case Why most deals in the US end in litigation.
- The Mystery of Corporate Social Responsibility In a Market Economy Economic growth or sustainability?
- The Walls Have Fallen, Run for the Keep The Kornhaas case.
- Organisational contracts: rethinking the European paradigm In the twiglight zone between contracts and corporate entities?
- RegTech as a response to regulatory expansion in the financial sector Is the remedy worse than the illness?
- The effect of formation rules on the functioning of capital markets: lessons from history Germany and UK in the 19th century
- Supply Chain Liability: The French Model Corporate liability for human rights violations.
- Nullity of a contract: the economic equivalent of a put or call option Three cheers for opportunistic contract parties?
- Shareholders in insolvency law: here to stay On the absence of real borders between company law and insolvency law.
- The Supreme Court of the United States on the “absolute” priority rule in structured dismissals – A structural dam to stem a flood of undesirable consequences Concrete tips to the European and Belgian policymaker.
- It’s the people, stupid! Individual characteristics influencing bankruptcy Cherchez la femme.
- What does a legal entity know? And do you know it?
- Legal seizure of shares: an underrated cornerstone of organizational law The next chapter in the scholarship on organizational law.
A post by guest blogger Bram Van Baelen
It is a fundamental rule in many legal orders that when a debtor fails to pay his debt(s), his personal creditors can seize his assets. Legal seizure of assets is, as such, a necessary tool for creditors in order to force an unwilling debtor to fulfill his obligations. Ultimately, legal seizure can lead to a forced sale of the debtor’s assets.
When a debtor owns shares in a share capital corporation, these shares are part of the debtor’s assets as well. Just like the debtor’s house, car, or bank account, shares in corporations are available for creditors to seek recourse on for their unpaid claims. Therefore, proper legal seizure proceedings of shares are in place in order to protect the interest of personal creditors of shareholders and to consolidate this fundamental principle.
The legal seizure of shares is necessary for another reason as well. Continue reading “Legal seizure of shares: an underrated cornerstone of organizational law”