This volume arose out of an October 2003 Conference on Corporate Reorganizations and Bankruptcy organized by the Faculty of Law and Center for Company Law at Tilburg University. The principal focus of the issue is corporate governance and bankruptcy reform, but also highlights the European Company (SE) and the theory and practice of cross-border reorganizations and inter-state competition in corporate structures. The special issue has four major sections.

The Sarbanes-Oxley Act and the Securities Exchange Commission move too quickly when they prod the Financial Accounting Standards Board, the standard setter for US GAAP, to move immediately to a principles-based system. Priorities respecting reform of corporate reporting in the US need to be ordered more carefully. Incentive problems impairing audit performance should be solved first through institutional reform insulating the audit from the negative impact of rent-seeking and solving adverse selection problems otherwise affecting audit practice. So long as auditor independence and management incentives respecting accounting treatments remain suspect, the US reporting system holds out no actor plausibly positioned to take responsibility for the delicate law-to-fact applications that are the hallmarks of principles-based systems. Principles, taken alone, do little to constrain rent-seeking behaviour. In a world of captured regulators, they invite applications that suit the regulated actor's interests. Rules, with all their flaws, better constrain managers and compromised auditors. Broadbrush reformulations of rules-based GAAP should follow only when institutional reforms have succeeded.

This article provides a critical overview of the latest spate of European Commission proposals on the reform of corporate governance in the EU. The authors suggest that most of the proposed measures are simply reactions to recent corporate governance fallouts and new legislation in the US. This article supplies evidence that the EC's measures are in fundamental disequilibrium with the core and supporting institutions of corporate governance in the EU. The authors conclude that the EU should, rather than embark on a complex exercise in harmonisation, build on the strength of its diversity and imitate the US where it is warranted.

This paper evaluates the primary legal and financial mechanisms that help support the development of a venture capital market. Specifically, we argue that emulating the organization and contractual pattern of the US venture capital market could enhance the development of the European venture capital market. We first show that the modernization of the ‘venerable’ limited partnership form, based on US experiences, offers substantial contracting benefits for investors and is crucial to the operation of a mature venture capital market. We then argue that the emergence of more efficient limited partnership structures can emerge from jurisdictional competition between European states. We argue that the United Kingdom, which has recently embarked on general and limited partnership law reform, could, in light of the competitive lawmaking environment that the ECJ has opened up, be in the best position to enter the competition within the EU. It then explores the prominent features of the UK special Limited Partnership statute, which makes it possible for venture capitalists to organize their contractual relations that are best suited to the characteristics of the venture capital market. Finally, our analysis provides an understanding of the competitive forces that shape legal change, which has implications for the ongoing debate in Europe over the reform of limited partnership law and related business forms.

Scholars working in the ‘law and finance’ field have investigated empirically the links between various types of law and the incidence of venture capital finance. However, no study to date has systematically investigated the relationship between insolvency law – both personal and corporate – and venture capital finance. This paper argues that a nation's personal insolvency law may have an important impact on the demand for venture capital finance, with more severe treatment of insolvents tending to reduce demand. This hypothesis is subjected to a preliminary test by comparing data on venture capital investment activity with an index of ‘severity’ of insolvency laws, and is not falsified. This finding will be of interest to policymakers, as a number of recent national and EU initiatives have sought explicitly to encourage innovative firms and venture capital finance.

This paper surveys the main effects of recent legislative changes to the corporate insolvency law of the United Kingdom, from the standpoint of their potential impact upon corporate rescue. The reforms, enacted in 2000 and 2002 and brought into force during 2003, have recast the law relating to company voluntary arrangements, administrations, and administrative receiverships. After considering the various deficiencies in the pre-existing law, which rendered each of these procedures in varying ways unsatisfactory for the purpose of addressing the problems of financially troubled companies, the paper examines the process by which the declared intentions of the government when introducing its reforming legislation were significantly altered during the course of enactment into law. While the outcome of this dialectical drama has been the bringing about of some worthwhile improvements in the refashioned administration procedure, this has been accompanied by a significant dilution of the government's previously stated intentions with respect to the attenuation of the rights and powers of creditors holding security in the form of a floating charge. Consequently, the paper concludes that administrative receivership will retain a far greater practical significance than had been previously envisaged, while the opportunities made available to floating charge holders under the revised administration procedure provide a strong incentive for institutional lenders to continue to make use of this species of security. The author concludes that UK insolvency law has been unable to embrace the ‘American way’ of corporate rescue, with debtor-in-possession as its core principle, but has instead opted for a ‘rescue’ model in which creditor interests continue to assert a dominant influence.

This note sets out some preliminary ideas on the potential impact of the Enterprise Act 2002 on the bargaining strategy of secured lenders. Such strategy will be designed to limit the adverse impact of the Act on the erosion of secured lenders' enforcement rights. Sophisticated parties will bargain in the shadow of the law and, if accorded the necessary freedom, will bargain around it.

This article analyses the Council Regulation on the Statute for a European Company, and its impact on board structures and corporate governance within the European Union. It describes the Statute's structure, and highlights the Statute's many unanswered questions regarding corporate structure and governance. The article argues that the Statute will have its greatest positive effect on cross-border combinations, and will have little or no effect on normal takeovers, joint ventures, and subsidiaries. It advocates the immediate need for Member States with a two-tier structure to allow for a one-tier structure, and vice versa. Finally, the article asserts that the Statute will become an engine for regulatory competition among the Member States as they model their respective corporate forms to attract firms.

A recent case in the English High Court, Re Continental Assurance Company of London plc (Singer v. Beckett), constitutes the first judicial pronouncement on wrongful trading (s. 214 of the Insolvency Act) which concerns a major company. The case should render us cautious about the alleged superiority of wrongful trading over creditor protection regimes in other European jurisdictions, notably the German Insolvenzverschleppungshaftung, and the consequential idea of the European Commission to propose a new directive on wrongful trading.

Risk capital plays a vital role for growth and jobs in Europe. It is against this background that the European Commission launched its 1998 Risk Capital Action Plan in order to eliminate persistent regulatory barriers that may impede the creation of a truly single market. In the framework of the Action Plan's implementation, a strong need was felt for research advice. Thus a Risk Capital and the Financing of the European Innovative Firms (RICAFE) research network was formed by members of the London School of Economics and Political Science (Financial Markets Group), the Centre for Financial Studies in Frankfurt, HEC School of Management Paris and Turin University. The project co-leaders of RICAFE are Professor D.C. Webb and Dr Marco Da Rin. RICAFE aims to achieve research breakthroughs in the economics of risk capital financing of innovative companies and to offer informed, insightful research advice to the commission, forming the basis of a blueprint for the implementation of the Risk Capital Action Plan. In the intellectually stimulating atmosphere of the financial Markets Group at the London School of Economics, the First RICAFE Conference was held on 24-25 October 2003.