Conference organized by University of Antwerp, Harvard Law School and ECGI on 30 May
Short-termist behavior by corporations is often seen as a large societal problem. For example, Joe Biden wrote in a 2016 op-ed for the Wall Street Journal: “Short-termism […] is one of the greatest threats to America’s enduring prosperity”.
However, the debate on short-termism has so far largely focused on possible short-termism in the US and the UK). Short-termism in European corporate governance has received much less attention. A notable exception is the 2020 EY study for the European Commission on “directors’ duties and sustainable corporate governance. This study is generally regarded as heavily flawed, however.
For this reason, the University of Antwerp, Harvard Law School and the European Corporate Governance Institute (ECGI) have decided to organize a conference on “short-termism in European corporate governance” on 30 May in Antwerp. We believe that it is important to study short-termism in (continental) Europe, because corporate governance in continental Europe differs in important respects from corporate governance in the US and the UK, with potentially profound implications for the short-termism debate.
Controlling shareholders in Europe
A first important difference is that corporations in continental European countries more often have a controlling shareholder than corporations in the US and the UK. For example, according to one paper, the percentage of shares held by the largest shareholder in the corporation is much higher in France (46.4%), Germany (45.3%), Belgium (38.6%) and the Netherlands (34.6%), than in the US (21.4%) and the UK (19.5%).
While Special Purpose Acquisition Companies (SPACs) made a comeback to the American stock markets in 2020, Euronext Amsterdam became the SPAC champion on the old continent, with 16 SPAC listings (FT, 17 February 2021). As we appear to be past the hype, burning legal questions to understand the legal landscape for alternative investment funds, and in particular European SPACs come to the fore. One of these questions is whether European SPACs are subject to the Alternative Investment Fund Managers Directive (AIFMD)? There is no clear answer to this question. In this article, I will try to summarize the pros and cons and I will bring on three arguments why AIFMD could apply in my opinion.
A post by guest blogger Thomas Van Gerven (student, KU Leuven)
On November 30 2022, the Belgian federal government and the governments of the federated entities adopted the cooperation agreement on the Belgian foreign direct investment screening mechanism. The draft text has now been submitted to the various parliaments for approval and should enter into force on June 1, 2023. This adds Belgium to the list of EU Member States that have recently tightened their rules on foreign direct investment (FDI). Similarly, in mid-2022, the Dutch Chamber of Representatives adopted the Wet Vifo, establishing the new Dutch general (F)DI screening mechanism. Its entry into force is scheduled for early summer 2023.
As many have pointed out, the practical implications of these new FDI rules for mergers and acquisitions (M&A) in the Benelux can hardly be overstated. For one thing, FDI screening will affect the timetable of transactions. As with merger control, the deal will not be able to close prior to the green light from the respective screening authorities (i.e. the Interfederal Screening Committee for Belgium and the Investment Screening Office for the Netherlands). As important as these practical implications are, the tightening of FDI rules also raises more theoretical questions, that is, from a Law and Economics perspective.
With the publication of its Proposal for a Directive on the harmonisation of certain aspects of insolvency law in December 2022 (Proposal), the European Commission has moved into unchartered territory. The first responses have been divergent. Some commentators indicated that (part of) the Proposal is farfetched and at odds with currently well-functioning domestic insolvency legislation in EU Member States, whereas others had clearly hoped for more extensive proposals for harmonisation.
To explore the Proposal in further detail, the Conference on European Restructuring and Insolvency Law (CERIL) organises an international conference on 20 and 21 April 2023 in Leiden (the Netherlands). The CERIL Conference will bring together experts from practice, academia, and the bench who will assess the topics proposed for harmonisation. As input for the Conference itself, CERIL conducts a survey collecting views from across Europe on the reception of this new Proposal.
Commission Proposal to harmonise certain aspects of insolvency law
On 7 December 2022, the European Commission presented its long expected legislative proposal for a directive to harmonise certain aspects of insolvency law (COM/2022/702 final). With the aim to contribute to the development of a Capital Markets Union, the Commission has put forward this Proposal on corporate insolvency rules. More specifically, the Commission aims to make substantive insolvency regimes more coherent by reducing legal uncertainty. It also aims to promote cross-border investment.
With the objective of harmonising ‘certain aspects of insolvency law’, the Proposal covers a variety of more or less separate topics, including (i) avoidance actions, (ii) asset tracing, (iii) pre-pack proceedings, (iv) directors’ duty to file, (v) winding-up of insolvent micro-enterprises, (vi) creditors’ committees, and lastly (vii) measures enhancing the transparency of national insolvency laws.
What is the purpose of a corporation? Is it, as Nobel Economics laureate Milton Friedman famously claimed, “to increase its profits”? Or is it, as the Business Roundtable—a group of approximately 200 mostly USA corporate CEOs— claimed in 2019, “generating good jobs, a strong and sustainable economy, innovation, a healthy environment and economic opportunity for all.”
In the academic sphere, the weight of scholarly opinion has tilted substantially towards stakeholder capitalism in recent years. The late law professor Lynn Stout dismissed shareholder value maximization as a mere myth, albeit a powerful one she claimed “causes companies to indulge in reckless, sociopathic, and socially irresponsible behaviors.” Canadian law professor Joel Bakan went even further by condemning the business corporation itself as a “pathological institution” whose relentless pursuit of profit has psychopathic attributes. In making such arguments, they reflect a widely shared narrative that “corporations are powerful, evil, malevolent, bad-actors intent on profit-making at the expense of the health, safety, and well-being of individuals.”
The new Civil Code now contains a general prohibition on unfair terms in contracts. Before that, the B2B and B2C legislation had already introduced a similar prohibition, but financial services had been (partially) exempted. Such exemption for financial services, however, does not appear in the new Civil Code. This leaves the question as to what extent contracts on financial services (international corporate lending in particular) are now caught by the general prohibition on unfair terms in the new Civil Code.
This contribution looks into the arguments and attempts to create some clarity in a blurry picture.
A post by Silvia Van Dyck, Nathalie Colin and Nikolaas Van Robbroeck (Freshfields Bruckhaus Deringer)
The Court of Justice of the European Union (CJEU) this week ruled that the provision under EU legislation which requires that beneficial ownership information on EU companies and other legal entities is generally and publicly accessible violates privacy and data protection rights and is therefore invalid. This represents a significantly change to the transparency of company information and may have an immediate impact on the related registers across the EU.
To inspire our summer reading Corporate Finance Lab asked a few prominent lawyers and friends of the Lab: (1) which books were formative for you as a lawyer? en (2) what is your summer reading or what do you recommend? Today: Xavier Dieux, professor emeritus at the ULB, lawyer at the Brussels bar and member of the Royal Academy of Belgium.
Report 2022-2 on Cross-Border Effects in European Preventive Restructuring
The independent think tank Conference on European Restructuring and Insolvency Law (CERIL) has published its latest Statement and Report 2022-2 on Cross-Border Effects in European Preventive Restructuring. As EU Member States implement the EU Preventive Restructuring Directive (2019/1023), CERIL has identified and assessed the benefits and shortcomings of applying the European Insolvency Regulation 2015 (EIR 2015) to govern the cross-border effects of proceedings in national preventive restructuring frameworks. In the absence of an adequate framework for these new preventive restructuring proceedings, the CERIL Report and Statement formulate recommendations to the EU and national legislators.
On 23 September 2022, prof. dr. Melissa Vanmeenen (UAntwerpen) en Inge Van de Plas (UAntwerpen) invite you to an international seminar on law reform in secured transactions and insolvency proceedings. The day consists of three parts: PhD workshop, masterclass and the public doctoral defense of Inge Van de Plas.
During the PhD workshop selected young researchers have the opportunity to present their ongoing research to an international expert panel, including prof. Neil Cohen (Brooklyn Law School, USA), prof. Orkun Akseli (University of Manchester, UK), prof. Florence George (UNamur) and Prof. Matthias Storme (KU Leuven). Interested researchers can find more information on the PhD workshop in the call for papers. The deadline for applications is 15 August 2022.
In the masterclass, experts will present a topic related to their ongoing research in secured transactions and corporate insolvency proceedings. More information on the (preliminary) program can be found on our website.
Everyone is welcome to attend both the PhD workshop and masterclass, regardless of whether you are selected to present at the PhD Workshop. In order to attend the PhD workshop and/or masterclass, please register here.
Public doctoral defense Inge Van de Plas
At 5pm everyone is invited to the public doctoral defense of Inge Van de Plas. The title of the doctoral research is: Retention of title in secured transactions law from a creditor’s perspective – a comparative analysis of (non-)functional approaches
Afterwards, everyone is welcome at the reception.
Participation is free of charge, however, places are limited. More information on location will follow after registration. Travel expenses are not covered by the organization
The INSOL Europe Academic Forum (IEAF) is inviting submission for its 18th annual conference, taking place from 5-6 October 2022 in Dubrovnik (Croatia). Expressions of interest are invited for the delivery of research papers within the overall theme of the academic conference: “Insolvency Law in Times of Crisis”
The conference is intended to focus on, inter alia, the following overall topics:
The longer-term impact of the COVID-19 pandemic on insolvency and restructuring laws in the EU and elsewhere;
The impact of geopolitical crises and macro-economic uncertainties on insolvency and restructuring laws in the EU and elsewhere;
Reflections on the implementation of the Preventive Restructuring Directive 2019/1023 Directive;
Cross-border issues relating to the new restructuring frameworks, and
Reflections on the EU initiative for further harmonization of insolvency laws.
The IEAF board also invites submissions on other topics that fall with in the scope of the overall theme of the conference.
Shareholder activism used to be rare in Belgium. According to two studies, there were only 9 hedge fund activist engagements in Belgium between 2000 and 2010, and 7 between 2010 and 2018. This is much lower than the number of activist campaigns in the US, even in comparison to the total number of listed companies. However, shareholder activism is said to enter a “golden age” in Europe, with more corporations than ever at risk of activism. A second important trend is the rise of “ESG activism”, where the tools of shareholder activism are used to pursue “ESG” (environmental, social and governance) objectives. Such ESG activism can be pursued because the activist believes that it could contribute to long-term shareholder value, but also from a non-profit perspective. An example of the latter is the “one share ESG activism” campaign against Solvay by the hedge fund Bluebell, which has urged Solvay to stop the discharge into the sea of waste from a soda ash production plant in Italy.
Shareholder activism in Belgium, and especially the recent trend of ESG activism, has not received much attention in Belgian legal scholarship, however. To fill this gap, we (the Federation of Belgian Enterprises (FEB) and the Jean-Pierre Blumberg Chair at the University of Antwerp) have decided to organize a one-day conference on 9 June 2022 to explore the present and future of activism in Belgium.
Below, I give a small teaser of my introductory presentation.
Een disputatio over de omzetting van de Herstructureringsrichtlijn tussen Dominique De Marez en Frederik De Leo.
De Herstructureringsrichtlijn, die haar intellectuele wortels vindt in de Amerikaanse Chapter 11 procedure, bepaalt dat de lidstaten ervoor moeten zorgen dat betrokken partijen in afzonderlijke categorieën worden behandeld. Deze indeling in categorieën moet voldoende gedeelde belangen weerspiegelen op basis van verifieerbare criteria. Anders dan het collectief akkoord vandaag, komen ook aandeelhouders hierbij nadrukkelijk in het vizier. De nationale (Belgische) wetgever kan er immers voor opteren om aandeelhouders als betrokken partijen bij het reorganisatiegebeuren te betrekken. Wie categorie zegt, zegt onmiddellijk ook categorie-overschrijdende cram-down. Ook met dit nieuwe (en eerder ingewikkelde) concept zal de Belgische praktizijn vertrouwd moeten geraken.
Al deze complexe regels hebben onmiskenbaar een juridische en financiële logica. Even onmiskenbaar is dat zij de met een reorganisatieprocedure gepaard gaande transactiekosten gevoelig dreigen te verhogen. Deze vaststelling doet dan ook de vraag rijzen of België, naar bv. Frans voorbeeld, er niet goed aan zou doen de genereuze KMO-uitzondering maximaal in te vullen. “Europa” laat inderdaad een eenvoudiger insolventierecht toe voor KMO’s. Hierbij speelt ook dat KMO’s op vele vlakken niet zomaar gelijk te stellen zijn met grote ondernemingen (die in dit soort wetgeving vaak als (impliciet) wetgevend paradigma fungeren). Dit zou dan kunnen resulteren in een insolventierecht in twee snelheden. Eenvoudig voor KMO’s; gesofisticeerd voor grotere ondernemingen. Een antwoord op deze vraag, vereist een goed inzicht in de werking en de gevolgen van voormelde nieuwe concepten.
Welke kaart de Belgische wetgever moet trekken, maakt het voorwerp uit van debat tussen Frederik De Leo (KU Leuven en UHasselt, advocaat) en Dominique De Marez (KU Leuven, advocaat).
Dit is één van de drie quaestiones die op 1 juni zullen worden bedisputeerd en waar Professor Xavier Dieux (ULB, advocaat te Brussel) zijn conclusies over zal delen.
De studiemiddag ter ere van vijf jaar Corporate Finance Lab vindt plaats op woensdag 1 juni 2022 te Leuven van 13u35 tot 17u45. De thema’s die aan bod komen zijn de deficitaire vereffening, soorten van aandelen en de gerechtelijke reorganisatie. De inschrijvingsprijs is 75 EUR en omvat een koffiepauze en receptie. Erkenning bij OVB en IBJ voor 4 punten. Erkenning door IGO in aanvraag. Deelname kan fysiek of via livestream. Inschrijven kan hier.
A post by guest blogger Joeri De Smet (Jan Ronse Institute, KU Leuven)
The age of asset management may be upon us. The industry has grown rapidly over the last decade and the market power of its major players has been analysed from different points of view, including corporate governance and competition policy. In a recent paper, I analyse the nexus between asset management and financial stability. Specifically, I ask the question whether asset managers can be systemically important and, if so, how EU and US regulators should respond.
Both jurisdictions already regulate systemically important financial institutions: the US implemented such regulation as part of the Dodd-Frank Act in 2010; the EU included it in the 2013 Capital Requirements Directive. Systemically important financial institutions or “SIFIs” are institutions that can cause or amplify systemic risk. Systemic risk, in turn, is “a risk of disruption to financial services that is caused by an impairment of all or parts of the financial system and has the potential to have serious negative consequences for the real economy” (as defined by the IMF, FSB and BIS in 2009). But current SIFI regulation does not account for a scenario in which asset managers and/or investment funds become systemically important. The designation procedure and regulation in the EU is tailored to banks, while the US system does leave room for designation of asset managers but makes it impossible in practice – particularly after reforms under the Trump administration. In addition, there is no scholarly consensus on the question whether SIFI regulation for asset managers would be useful.
Eén van de belangrijkste waarderingsuitgangspunten bij het bepalen van de prijs van de aandelen in het kader van de vennootschapsrechtelijke geschillenregeling is de peildatum. Vanaf dit referentiemoment draagt de uittredende of de uitgesloten aandeelhouder namelijk niet langer het economisch risico dat gekoppeld is aan de patrimoniale rechten die het aandeel vertegenwoordigt. Anders gesteld: de uittredende of uitgesloten aandeelhouder draagt niet langer het risico van een verarming van het vennootschapsvermogen maar kan ook niet langer genieten van de economische baten.
In het meest recente nummer van het TRV/RPS schreef ik een noot bij een arrest van het hof van beroep te Antwerpen (Antwerpen 7 januari 2021, TRV/RPS 2022, 196-200) waarin ik dieper inga op de peildatum, en in het bijzonder de implicaties van een verschuiving ervan.