In a recent paper Danielle D’Onfro (Washington University Law) argues that security interests are best understood as a form of “limited liability property”. Limited liability, i.e. the privilege of being legally shielded from liability that would normally apply, has long been considered the quintessential feature of equity interests. The author convincingly argues, however, that limited liability is a critical feature of security interests as well. Debt and equity are indeed not the opposites they are sometimes believed to be. The paper will soon be published in Cardozo Law Review and can already be consulted here.
Category: *In English
The Implementation of the New Insolvency Regulation Recommendations and Guidelines
The MPI Luxembourg, together with the Universities of Milan and Vienna, has published some very useful guidelines and recommendations with respect to the implementation of the new Insolvency Regulation. These guidelines and recommendations aim to facilitate cooperation and improve mutual trust. They cover three areas: (i) the scope of application (pre-insolvency and hybrid proceedings), (ii) the cooperation between main and secondary proceedings, including the new instrument of synthetic proceedings, and (iii) the new framework for insolvency of group of companies. The document is the result of a public survey, original research as well as in depth discussions with stake holders. The guidelines and recommendation can be consulted here.
RegTech as a response to regulatory expansion in the financial sector
Paper by Veerle Colaert (KU Leuven)
In the aftermath of the financial crisis, the financial sector was hit by a tidal wave of new legislation. The question of how financial institutions can remain compliant with this ever expanding financial legal framework has however been largely neglected. A recent paper (see ssrn or academia.edu) by Professor Veerle Colaert (KU Leuven) explores the potential of RegTech in this respect – the use of technological solutions to facilitate compliance with and monitoring of regulatory requirements. Continue reading “RegTech as a response to regulatory expansion in the financial sector”
The effect of formation rules on the functioning of capital markets: lessons from history
Carsten Gerner-Beuerle (LSE) on link between formation rules and the development of capital markets
An earlier post (in Dutch) discussed the risk of moral hazard when limited liability allows company owners to take excessive risks without needing to fear personal losses. This goes to the expense of company creditors. Minimum capital requirements were suggested as a remedy since this raises the stakes for company owners and thus discourages excessive behavior.
A recent analysis of corporate and financial regulation in Britain and Germany in the 19th century argues, however, that stringent formation rules, such as minimum capital requirements, could possibly hamper the development of financial markets (see: C. Gerner-Beuerle, ‘Law and Finance in Emerging Economies: Germany and Britain 1800-1900, The Modern Law Review, Vol. 80 Iss. 2, March 2017, 263-298).
Shareholders in insolvency law: here to stay
One of the very first posts on this blog related to the publication of the inaugural lecture of prof. dr. Rolef de Weijs on the occasion of his appointment as professor of National and International Insolvency Law at the University of Amsterdam’s (UvA) Faculty of Law. In this lecture, the position of shareholders in insolvency law is critically examined. Until recently, insolvency was all about creditors (company law, on the other hand, was all about shareholders). The lecture by prof. de Weijs clearly demonstrates the need for insolvency law to also take into account the position of shareholders. Debt and equity go hand in hand, also – and especially – in times of insolvency. On a more general level, the lecture illustrates the absence of real borders between company law and insolvency law. An (updated) English translation of the lecture can now be found here.
RPS-TRV Prize 2016 awarded to Tom Vos: freeze-out of minority shareholders
The TRV-RPS Prize 2016 for the best master thesis in company, financial or tax law written at a Belgian university is awarded to Tom Vos. His master thesis studied “freeze-outs of minority shareholders” using a comparative law and economics approach. The thesis is available here. A revised version will also be published in TRV-RPS.
This prize has been awarded by the Revue pratique des sociétés (RPS) since 2009. Since the merger of RPS with the Tijschrift voor Rechtspersoon en Vennootschap (TRV) in 2016, the prize is awarded by the combined journal TRV-RPS, the leading journal for company law in Belgium.
About the master thesis
The master thesis started from the problem that minority shareholders of a listed company often constitute a nuisance to a controlling shareholder. It then considered to what extent the controlling shareholder can eliminate the minority shareholders through a freeze-out, and what protection these minority shareholders should receive. Continue reading “RPS-TRV Prize 2016 awarded to Tom Vos: freeze-out of minority shareholders”
Delaware halts the eruption of M&A litigation in the Volcano case
A post by guest blogger Vincent Chantillon
The United States has a problem of litigation. If a large M&A deal is announced, it is almost certain that a stockholder will challenge the deal in court. In 2014, 93% of all M&A deals valued over $100 million were challenged in court. This marked the fifth consecutive year in which more than 90% of all M&A deals valued over $100 million were challenged. This large amount of litigation has burdened the corporate world, and the Delaware Courts have started to take action to stop it. Continue reading “Delaware halts the eruption of M&A litigation in the Volcano case”
New German rules on Group Insolvency
Last week, the German Bundestag voted the Gesetz zur Erleichterung der Bewältigung von Konzerninsolvenzen. The purpose of this law is to bridge the gap between the economic unity of enterprise groups and their legal plurality, and as such to overcome the persistent entity-centrism of insolvency law. To do so, the law provides for the possibility of territorial concentration of insolvency proceedings, the possibility to appoint the same insolvency practitioner in multiple insolvency proceedings, and the possibility of a group coordination procedure. Similar rules can already be found in the recast Insolvency Regulation. This is not a coincidence as the main source of inspiration for the European rules … was the original German legislative proposal on group insolvency (which dates from 2013-2014). It can only be hoped that other legislators will soon follow the European and German example.
Een persmededeling van professor en parlementslid Heribert Hirte vat het belang van de wet als volgt samen:
Mit diesem Gesetz sind wir endlich im 21. Jahrhundert angekommen. Bisher wurde der Konzern im Insolvenzrecht eher stiefmütterlich behandelt, was auch dazu geführt hat, dass das Bild vom Unternehmen beim Bürger noch immer geprägt ist von der einzelnen Gesellschaft, meistens der GmbH oder der Aktiengesellschaft. Die wirtschaftliche Realität ist aber eine völlig andere. Unternehmensgruppen, teilweise bestehend aus mehreren Hundert einzelnen Gesellschaften, bestimmen das Geschehen. Das gilt nicht nur für die bekannten multinationalen Konzerne, sondern auch für viele Mittelständler und sogar Handwerker
Supply Chain Liability: The French Model
A post by guest blogger Penelope Bergkamp
On 21 February 2017, the French Parliament adopted a law (the “Corporate Duty of Vigilance Law” or “Law”) that creates novel corporate supply chain liability. Specifically, the Corporate Duty of Vigilance Law imposes a duty of vigilance on large companies to prevent serious violations of human rights and fundamental freedoms and serious environmental damage in their supply chain. In a previous post, I discussed the concept of supply chain liability. As I pointed out there, the concept had not been defined by law makers yet. The French legislature has now attempted to operationalize the concept through new legislation.
Continue reading “Supply Chain Liability: The French Model”
A bad man in an evil world?
Closing remarks at the occasion of 2017 Heremans Lecture by Professor DiMatteo
A caricature of classical economic theory has it that people’s behavior can be fully explained by the rational pursuit of their self-interest. We act egoistically and opportunistically. It is a vision of human behavior which is rather bleak. Continue reading “A bad man in an evil world?”
Nullity of a contract: the economic equivalent of a put or call option
How the law exploits the opportunism of contract parties to make the nullity sanction sting
A previous post (in Dutch) discussed a recent case of the Belgian Supreme Court about the nullity of a sale of shares because of prohibited financial assistance. The case giving rise to the judgement of the Belgian Supreme Court illustrates how the nullity sanction is cleverly designed to exploit the incentives of contract parties to serve the legislator’s goals. Continue reading “Nullity of a contract: the economic equivalent of a put or call option”
Kenneth Arrow, Nobel-Winning Economist, Dies at 95
This week saw the passing of Kenneth Arrow, one of the giants of modern economics. Arrow was best known for his work on the general equilibrium theory, setting out the conditions under which the “invisible hand” of market competition among self-serving individuals serves society well. His fundamental ideas have been applied to the design of insurance products, financial products, employment contracts and much more. The full New York Times obituary can be read here.
Continue reading “Kenneth Arrow, Nobel-Winning Economist, Dies at 95”
Real seat theory vs incorporation theory: the Belgian case for reform
A post by guest blogger Marc Van de Looverbosch
For decades now, supporters of the real seat theory have been arguing with supporters of the incorporation theory over which theory (or which variant of either theory) best corresponds to the needs of modern business for purposes of determining which national company laws are applicable to bodies corporate. Continue reading “Real seat theory vs incorporation theory: the Belgian case for reform”
Quis custodiet ipsos custodes: agency problem in business, finance and politics
“Once you rely on agents, you create conflicts of interest. And you have to rely on agents”
See the recent Buttonwood’s article Who guards the guards? on the blog of The Economist with interesting thoughts on the “principal-agent problem” in business, finance and politics.
Guidelines for Communication and Cooperation between Courts in Cross-Border Insolvency Matters
On 1 February 2017, the Singapore Supreme Court and the US Bankruptcy Court for the District of Delaware, announced that they will formally implement the Guidelines for Communication and Cooperation between Courts in Cross-Border Insolvency Matters. This is the first time that a common framework has been adopted for courts to communicate and coordinate with each other in cross-border insolvency matters on a global level.
Corporate Finance Lab 