The field of comparative corporate governance is currently undergoing what may amount to a paradigm shift. Since the seminal analysis of the modern corporation by Berle and Means in 1932, the large publicly held corporation with dispersed shareholders as owners unable to effectively control management has dominated the field not only in the United States, the origin country of the Berle & Means corporation, but also elsewhere. Recent empirical analyses, however, document that the corporation with dispersed owners is much less common than typically assumed. As a result, many of the assumptions that have driven the analysis of the corporate sector in the past are currently undergoing review. To a large extent, the fresh look at the corporation, its ownership structure and performance, and the legal framework in which it operates can be attributed to the recent experience of the transition economies. Reform strategies that were implemented in these countries over the past decade included the reorganization of state owned enterprises into marketable share companies and their subsequent privatization. Corporatization and privatization were expected to lead to enterprise restructuring and improved performance. In fact, these expectations materialized only slowly, if at all, and, as will be further discussed below, the emerging enterprise structures in these countries looks quite different from earlier predictions. Cynics may say that these countries became the testing ground for empirically unfounded corporate finance theories. In fact, many privatization programs in transition economies were designed and advised by US trained financial economists who have now taken the lead in challenging the very same assumptions on which their advice had been based. While they earlier predicted that institutions will follow the market, they now argue that institutions, in particular legal institutions, are determinants of the ownership structure of firms and the development of capital markets. In any event, the process of transforming centrally planned economies into market economies has revealed how little is understood about markets and firms or the role of law and legal institutions for their functioning.

During socialist times the socialist enterprises were the basic entities of the socialist economic system. Admittedly, there were also commercial companies in Central and Eastern Europe in this period, but examples tended to be rare. In the form of limited liability companies (owned by the state or by a state entity) they typically served the purpose of facilitating economic exchange with third countries (companies or banks for foreign trade, insurance companies, etc.). In Romania, Hungary, Poland and the GDR, for example, their legal foundations dated from the period in between the World Wars, and partly even from the 19th century. Regulation largely ceased to develop after that time. Bulgaria, to mention another example, abolished – without substitution – its Commercial Code and Act on Private Limited Companies in 1951, dissolved all trading companies and vested in the Ministerial Council the authority to set up companies by the mere approval of their articles of association. In this way, the insurance company Bustrad and the Bulgarian Bank of Foreign Trade were set up in 1961 and 1964 respectively, both of them as public limited companies. Following a number of intermediate steps, of which the State Council's resolution 56/1989 on economic activity deserves special mention, Bulgarian company law was finally recodified in the second part of the commercial code in 1991.

German corporate group law (or rather, to be more precise, the German Recht der verbundenen Unternehmen, i.e., the law of affiliated companies, §§ 15 ff., 291 ff. Marketable Share Company Act [Aktiengesetz, abbreviated AktG]) owes its existence to special concerns of the German legislature at the end of the 1950s and the beginning of the 1960s regarding the ability to protect the interests of outsiders in group-dependent marketable share companies (Aktiengesellschaften). The interests of shareholders and creditors were considered to be so intensive, so inscrutable and so continuously endangered, that the legislature believed that the existing company law was incapable of satisfactorily providing the requisite protection.

Financial groups may be defined as groups in which one or more components, legally independent companies, engage in offering financial services to the public, acting as a bank, a broker, an insurance company, an investment adviser or in any other capacity, offering their services to individuals, professional investment managers or other business firms. Firms that exclusively offer financial services to other group entities – the so-called “in-house banks” would be excluded, as these normally do not receive “deposits or other repayable funds” from the public.

The present contribution looks at the private international law regimes of EU Member States with regard to companies and their relationship with the provisions of the EC Treaty (“the Treaty”) concerning freedom of establishment. After the Centros judgment of the European Court of Justice (hereinafter usually referred to as “the Court of Justice”) and the avalanche of comments on this case, this issue is more topical than ever. But it would be wrong to say that it is new: the controversy about the meaning of Articles 43 and 48 EC [ex Articles 52 and 58 ECT] for national conflict-of-law rules regarding companies has been dragging on for at least fifteen years and, if anything, the equally illustrious Daily Mail judgment of the Court of Justice only quietened it down for a very brief period.

The Centros decision ranks as one of the most controversial decisions of the ECJ to date. The decision has raised a number of important issues, which have been vigorously debated in several countries of the EU. The most controversial question raised by the Centros judgement is whether the so-called siége réel Theory, or Sitztheorie, which until now has been applied by the majority of the EU Member States for determining the nationality of companies, can still be applied to companies which originate from other Member States. If the siège réel theory can no longer be applied by a Member State to deny the recognition of certain foreign companies as separate legal entities, this fact would mean an important change of perspective for the European Company Law.