In the essay below, Dieter Van Esbroeck, discusses competing theories on market efficiency of Pareto, Hayek and Schumpeter. The different insights in the operations of the market lead to rather diverging policy recommendations to harvest the gains of free competition and efficiency. His essay won the Montaigne-Essay contest of 2019 organized by the Institute for Education in Philosophy and Social Sciences (Ifese).
Zaterdag 27 april 2019 organiseert het Instituut voor Filosofische en Sociaal-wetenschappelijke Educatie (Ifese) een seminarie over Law and Economics. Tijdens dit seminarie kunnen de deelnemers teksten van de hand van Ronald Coase, James Buchanan en Gary Becker bediscussiëren onder begeleiding van em. prof. dr. Boudewijn Bouckaert. De activiteit zal plaatsvinden in Antwerpen.
- R. COASE, “The problem of Social Cost“
- J. BUCHANAN, “The Constitutional Imperative” (hoofdstuk 1 in Reason of rules)
- G. BECKER, “Crime and punishment: An Economic Approach“
Today, the European Parliament approved the directive on business insolvency and restructuring procedures.
The insolvency framework covers three main measures:
- preventative restructuring framework: that allows companies in financial difficulty to negotiate a restructuring plan with creditors, while maintaining their activity and preserving jobs
- second chance for honest insolvent or over-indebted entrepreneurs, through full debt discharge after a maximum period of 3 years, with safeguards against abuse
- targeted measures for member states to increase efficiency of insolvency, restructuring and discharge procedures, in particular expedient treatment of procedures
The final text also includes guarantees that workers’ rights, such as collective bargaining and industrial action, right to information and consultation, will not be affected by restructuring procedures.
Requirements on the duties of the company director in insolvency proceedings were also introduced. They include regard to the interest of creditors, other stakeholders and equity holders, taking steps to avoid insolvency and avoiding deliberate or grossly negligent conduct that threatens the viability of the business.
In the final hours before the vote on the Preventive Restructuring Framework, the debate continues in full force. Two blog posts have been posted, urging the legislators to carefully reflect upon the proposed text.
The first post is written by prof. dr. M. Brinkmann (“Die relative Vorrangregel aus Art. 11 (1) (c) der Insolvenzrichtlinie: nicht nur untauglich, sondern brandgefährlich!”) and can be consulted here.
Who says insolvency law cannot be thrilling?
The message of the post last week on this blog by Professor R.J. de Weijs, A.L. Jonkers and M. Malakotipour of the University of Amsterdam has been replicated by the authors in a Letter to the EP, with a supporting letter by Professor Douglas Baird of The University of Chicago.
Professor Bob Wessels of Leiden has replied to their arguments on his blog.
The draft Directive is up for vote on 27 March 2019.
Asset partitioning refers to limited liability (or: owner shielding) and entity shielding. In both cases a pool of assets is allocated to a pool of liabilities.
The economic justifications of limited liability and entity shielding typically refer – sometimes implicitly – to the situation of many shareholders in a business. Hansmann and Squire refer to this type of asset partitioning as external asset partitioning (“External and Internal Asset Partitioning: Corporations and Their Subsidiaries, The Oxford Handbook of Corporate Law and Governance (Forthcoming)”; Yale Law & Economics Research Paper No. 535, 2.). Asset partitioning is also used within a business to make separate pools of assets and liabilities; this is internal asset partitioning (ibid.). A typical example is a corporate group, where the business as an economic unity is internally, through affiliates, divided in separate pools of assets. We also consider a company owned (or primarily owned) by a single shareholder as internal asset partitioning, even if that shareholder is a physical person. The economic unity between the single shareholder and the business of her company is similar to, if not stronger than, that between the separate entities of a corporate group.
Asset partitioning builds walls between pools of assets and liabilities. Sometimes the insiders themselves disregard the asset partitioning which they have set up themselves. This is referred to as selective de-partitioning. A crude example is the single shareholder or the parent company extracting assets from its company or subsidiary or shifting liabilities towards it. A more sophisticated example is a guarantee of one entity of a group towards another entity of the group. Often legal rules provide the creditors of the shareholders of a company with remedies against selective de-partitioning. In such a case the law reinforces the walls of asset partitioning.
We will use Belgian law as an example of how an entity-focussed tax law can favour asset partitioning and discourage selective de-partitioning. Continue reading “The underestimated role of tax law in promoting asset partitioning ánd discouraging selective de-partitioning”
A post by Jasper Van Eetvelde & Michiel Verhulst
The CJEU judgement on the 14th of March 2019 in the Vantaan kaupunki case shows the increasing spillover effects of the public enforcement of competition law on the private enforcement thereof. The CJEU found that the concept of ‘undertaking’ as autonomously interpreted in competition law is applicable when claiming for damages on the basis of breaches of EU competition law. This has far-reaching consequences, since it implies that both the principles of parental liability and economic continuity are henceforth part of the national rules on the private enforcement of EU competition law. This triggers some reflections on corporate law on voluntary winding-up in general and the usefulness of focussing on the economic reality outside competition law. Continue reading “The CJEU Vantaan kaupunki case: piercing the corporate veil via private enforcement of EU competition law”