Comparative Company
Law
PERIOD 4
,Table of contents
Lecture 1: Freedom of establishment in the EU: Crossing European Borders.................................................2
Tutorial 1: Company migration (freedom of establishment for companies within and outside of the
European Union).....................................................................................................................................................7
Lecture 2: The Division of Powers: the board and the employees....................................................................25
Tutorial 2: Introduction to the US system and the Board.................................................................................29
Lecture 3: Shareholders and the internal division of powers...........................................................................45
Tutorial 3: Shareholders.......................................................................................................................................49
Lecture 4: Crossing borders: cross border mergers, divisions, conversions and the European Company..58
Tutorial 4: Mergers, divisions and conversions..................................................................................................65
Lecture 5: Takeovers.............................................................................................................................................76
Tutorial 5: The Market for Corporate Control I: Takeovers...........................................................................83
Tutorial 6: The Market for Corporate Control II: Judicial Review of Board................................................92
Lecture 7: Company groups...............................................................................................................................103
Tutorial 7: (Multi) national company group structures..................................................................................108
1
,Lecture 1: Freedom of establishment in the EU: Crossing European Borders
Part 1
Freedom of establishment includes:
- Freedom of establishment throughout Europe for natural persons and legal persons
(such as companies and firms).
- Goal of the EU: to create a single market and the freedom to choose.
Free movement of persons:
- Art. 49 TFEU: restrictions on freedom of establishment of nationals of Member States
is prohibited; inclusive the right to set up a company.
- Freedom of establishment art. 54 TFEU: Companies are nationals.
Companies or firms formed in accordance with the law of a Member State and having
their registered office, central administration or principal place of business within the
Union shall, for the purposes of this Chapter, be treated in the same way as natural
persons who are nationals of Member States.
Every Member State decides which connecting factors they use.
Freedom of establishment for company’s includes:
- Freedom of establishment throughout Europe by a legal person duly established.
New business set up.
- Freedom of migration of legal person after incorporation from Member State A
Member State B.
Existing companies moving abroad.
Rules of Private International law
Traditionally two theories:
1. Real seat theory company matters are governed by the law of the country where the
"administration office", i.e. center of management and control is situated.
- Any time you enter our country with the intention to conduct business while making
use of limited liability companies or other legal persons, you should make use of a
legal person provided for under our national law.
- Advantages:
‘Reasonableness’: law of the country the company is most closely connected to
applies;
Abuse of foreign law hardly possible; and
‘Fairness’: equal company law market conditions for all players on market
- Disadvantages:
A company’s ‘real seat’ may well turn out be hard to determine; and
Cross-border cooperation and transfer of company seats are frustrated.
2. Incorporation company matters are governed by the law under which the company has
been duly incorporated.
- Any time you enter our country with the intention to conduct business while making
use of limited liability companies or other legal persons, you are free to choose the
company form of any foreign country you like.
- A company does not need to convert to another company form.
- Advantages:
Flexible/lenient: freedom to choose the applicable law;
Legal certainty and predictability;
Attractive to (foreign) investors;
Reciprocity: mutual recognition of companies and mobility; and
Seat transfers (i.e. of headquarters) allowed for
- Disadvantages
‘Race for the bottom’/’rat race’; ‘Delaware’ effect; ‘beauty contest’;
2
, Unequal competition conditions at the domestic markets for home/foreign
investors?
Evasion.
- The UK and the Netherlands use the incorporation theory.
What is a seat of a company? That can be:
- The Registration office/statutory seat;
- The Management and control centre / Head office/ principle place of business etc.; or
- The use of connecting factors.
Outbound transfer/ home Member State the Member State the company is coming from.
Inbound transfer/ host the Member State where the company is going to.
Potential problems in case of a transfer:
- Creditors;
- Shareholders;
- Employees;
- Board structure and liability; and
- Supervision.
Case law
Daily mail art. 49 and 54 (ex art. 43 & 48) do not confer on companies incorporated under
the law of a Member State a right to transfer their central management and control to another
Member State while retaining their status as companies incorporated under the legislation of
the first Member State.
- Facts: a UK-company wanted to transfer its central management and control to the
Netherlands for tax purposes. The company was prevented from doing so by HM
Treasury, refusing to grant the necessary approval. Because according to the
relevant UK tax legislation a company needs consent of the Treasury before
transferring its registered office.
Outbound case.
Centros any overall refusal to register a branch (i.e. secondary establishment) of a
company duly established in another EC Member State is contrary to art. 49 and 54 (ex artt.
43 and 48);
However: Other measures to fight or prevent fraud are allowed, provided that they are: (1)
non-discriminating, (2) justified in general interest, (3) suitable for securing the objective and
(4) they do not go beyond what is necessary.
- Facts: two Danish nationals had bought an off-the shelf private company limited by
shares in the UK and wanted to register a branch in Denmark (secondary
establishment). Registration of the branch was denied for the reason that by
registering a branch of an English company the stricter Danish regulations could be
avoided.
Inbound case.
Überseering if a company formed in accordance with the law of Member State ‘A’ also
having its registered office there, is deemed, under the law of another Member State (‘B’) to
have moved its actual centre of administration to Member State B, artt. 43 and 48 ECT (49
and 54 TFEU) preclude Member State B from denying the company legal capacity and,…,
the capacity to bring legal proceedings before its national courts.
- Facts: Überseering BV, a Dutch private ltd. company with management and control
office on German territory concluded a contract with German company NCC GmbH.
NCC had to rebuild immovables in Düsseldorf, owned by Überseering BV.
Subsequent to non-performance of NCC, Überseering BV started court proceedings
in German court.
3
Law
PERIOD 4
,Table of contents
Lecture 1: Freedom of establishment in the EU: Crossing European Borders.................................................2
Tutorial 1: Company migration (freedom of establishment for companies within and outside of the
European Union).....................................................................................................................................................7
Lecture 2: The Division of Powers: the board and the employees....................................................................25
Tutorial 2: Introduction to the US system and the Board.................................................................................29
Lecture 3: Shareholders and the internal division of powers...........................................................................45
Tutorial 3: Shareholders.......................................................................................................................................49
Lecture 4: Crossing borders: cross border mergers, divisions, conversions and the European Company..58
Tutorial 4: Mergers, divisions and conversions..................................................................................................65
Lecture 5: Takeovers.............................................................................................................................................76
Tutorial 5: The Market for Corporate Control I: Takeovers...........................................................................83
Tutorial 6: The Market for Corporate Control II: Judicial Review of Board................................................92
Lecture 7: Company groups...............................................................................................................................103
Tutorial 7: (Multi) national company group structures..................................................................................108
1
,Lecture 1: Freedom of establishment in the EU: Crossing European Borders
Part 1
Freedom of establishment includes:
- Freedom of establishment throughout Europe for natural persons and legal persons
(such as companies and firms).
- Goal of the EU: to create a single market and the freedom to choose.
Free movement of persons:
- Art. 49 TFEU: restrictions on freedom of establishment of nationals of Member States
is prohibited; inclusive the right to set up a company.
- Freedom of establishment art. 54 TFEU: Companies are nationals.
Companies or firms formed in accordance with the law of a Member State and having
their registered office, central administration or principal place of business within the
Union shall, for the purposes of this Chapter, be treated in the same way as natural
persons who are nationals of Member States.
Every Member State decides which connecting factors they use.
Freedom of establishment for company’s includes:
- Freedom of establishment throughout Europe by a legal person duly established.
New business set up.
- Freedom of migration of legal person after incorporation from Member State A
Member State B.
Existing companies moving abroad.
Rules of Private International law
Traditionally two theories:
1. Real seat theory company matters are governed by the law of the country where the
"administration office", i.e. center of management and control is situated.
- Any time you enter our country with the intention to conduct business while making
use of limited liability companies or other legal persons, you should make use of a
legal person provided for under our national law.
- Advantages:
‘Reasonableness’: law of the country the company is most closely connected to
applies;
Abuse of foreign law hardly possible; and
‘Fairness’: equal company law market conditions for all players on market
- Disadvantages:
A company’s ‘real seat’ may well turn out be hard to determine; and
Cross-border cooperation and transfer of company seats are frustrated.
2. Incorporation company matters are governed by the law under which the company has
been duly incorporated.
- Any time you enter our country with the intention to conduct business while making
use of limited liability companies or other legal persons, you are free to choose the
company form of any foreign country you like.
- A company does not need to convert to another company form.
- Advantages:
Flexible/lenient: freedom to choose the applicable law;
Legal certainty and predictability;
Attractive to (foreign) investors;
Reciprocity: mutual recognition of companies and mobility; and
Seat transfers (i.e. of headquarters) allowed for
- Disadvantages
‘Race for the bottom’/’rat race’; ‘Delaware’ effect; ‘beauty contest’;
2
, Unequal competition conditions at the domestic markets for home/foreign
investors?
Evasion.
- The UK and the Netherlands use the incorporation theory.
What is a seat of a company? That can be:
- The Registration office/statutory seat;
- The Management and control centre / Head office/ principle place of business etc.; or
- The use of connecting factors.
Outbound transfer/ home Member State the Member State the company is coming from.
Inbound transfer/ host the Member State where the company is going to.
Potential problems in case of a transfer:
- Creditors;
- Shareholders;
- Employees;
- Board structure and liability; and
- Supervision.
Case law
Daily mail art. 49 and 54 (ex art. 43 & 48) do not confer on companies incorporated under
the law of a Member State a right to transfer their central management and control to another
Member State while retaining their status as companies incorporated under the legislation of
the first Member State.
- Facts: a UK-company wanted to transfer its central management and control to the
Netherlands for tax purposes. The company was prevented from doing so by HM
Treasury, refusing to grant the necessary approval. Because according to the
relevant UK tax legislation a company needs consent of the Treasury before
transferring its registered office.
Outbound case.
Centros any overall refusal to register a branch (i.e. secondary establishment) of a
company duly established in another EC Member State is contrary to art. 49 and 54 (ex artt.
43 and 48);
However: Other measures to fight or prevent fraud are allowed, provided that they are: (1)
non-discriminating, (2) justified in general interest, (3) suitable for securing the objective and
(4) they do not go beyond what is necessary.
- Facts: two Danish nationals had bought an off-the shelf private company limited by
shares in the UK and wanted to register a branch in Denmark (secondary
establishment). Registration of the branch was denied for the reason that by
registering a branch of an English company the stricter Danish regulations could be
avoided.
Inbound case.
Überseering if a company formed in accordance with the law of Member State ‘A’ also
having its registered office there, is deemed, under the law of another Member State (‘B’) to
have moved its actual centre of administration to Member State B, artt. 43 and 48 ECT (49
and 54 TFEU) preclude Member State B from denying the company legal capacity and,…,
the capacity to bring legal proceedings before its national courts.
- Facts: Überseering BV, a Dutch private ltd. company with management and control
office on German territory concluded a contract with German company NCC GmbH.
NCC had to rebuild immovables in Düsseldorf, owned by Überseering BV.
Subsequent to non-performance of NCC, Überseering BV started court proceedings
in German court.
3
