The author highlights the pivotal role of justice in flexible and simple corporate law. He focuses on the significance of the notion of reasonableness and fairness in corporate law and on the way in which the fundamental rights embodied in the European Convention on Human Rights influence the relations between the shareholders within a company. He is of the opinion that reasonableness, fairness and fundamental rights will remain lasting elements of Dutch company law. A consequence of this trend is that courts will play a pivotal role in corporate law.

This paper proposes a conceptual framework according to which a suitable approach for treating corporate groups in insolvency, under domestic law, can be devised. Currently, the event of insolvency within a corporate group is often poorly dealt with under both domestic and international regimes. However, the matter demands special consideration, especially as ‘linking’ between affiliated group companies in their separate insolvencies may be necessary. This paper examines how ‘linking’ tools might be incorporated into domestic laws and ultimately harmonised, so that a level playing field for insolvencies within corporate groups (wherever they may take place) is established. It suggests three main features which are required for any workable solution. First, the system should be prudent and recommend linking tools only when these are needed. Second, clear and objective tests should be used to decide on any proposed mechanism, promoting certainty and clarity in judicial outcomes. Finally, the international scenario should be taken into account as well, in order to prevent possible manipulation by the debtors and use the benefits of treating the corporate group globally. Using these three concepts, the paper examines the various linking tools available, from procedural consolidation to contribution orders. It concludes by asserting that using the proposed concepts to construct the required linking mechanisms will help to achieve effective tools that are broadly accepted and provide an appropriate platform for dealing with corporate groups in their insolvencies.

This issue of the European Business Organization Law Review is devoted to the most topical and important areas of company law reform, namely the revision of corporate forms and the introduction of unincorporated business entities such as partnerships and hybrid business forms.

Research in corporate governance and labour law has been characterised by a disjuncture in the way that scholars in each field are addressing organisational questions related to the business enterprise. While labour has eventually begun to shift perspectives from aspirations to direct employee involvement in firm management, as has been the case in Germany, to a combination of ‘exit’ and ‘voice’ strategies involving pension fund management and securities litigation, it remains to be seen whether this new stream will unfold as a viable challenge to an otherwise exclusionary shareholder value paradigm. At the same time, recent suggestions made by Vice Chancellor Strine of the Delaware Chancery Court to dare think about potentially shared commitments between management and labour underline the viability of attempts at moving the corporate governance debate beyond the confines of corporate law proper.

This paper takes the questionable divide between management and labour within the framework of a limiting corporate governance concept as a starting point to explore the institutional dynamics of the corporation, thereby building on the theory of the innovative enterprise as developed by management theorists Mary O'Sullivan and William Lazonick. Largely due to the sustained distance between corporate and labour law scholars, neither group has effectively addressed their common blind spot: a better understanding of the business enterprise itself. In the midst of an unceasing flow of affirmations of the finance paradigm of the corporation, on the one hand, and ‘voice’ strategies by labour, on the other, it seems to fall to management theorists to draw lessons from the continuing coexistence of different forms of market organisation, in which companies appear to thrive. Exploring the conundrum of ‘risky’ business decisions within the firm, management theorists have been arguing for the need to adopt a more sophisticated organisational perspective on companies operating on locally, regionally and transnationally shaped, and often highly volatile, market segments. Research by comparative political economists has revealed a high degree of connectivity between corporate governance and economic performance without, however, arriving at such favourable results only for shareholder value regimes. Such findings support the view that corporate governance regimes are embedded in differently shaped regulatory frameworks, characterised by distinct institutions, both formal and informal, and enforcement processes. As a result of these findings, arguments to disassociate issues of corporate governance from those of the firm's (social) responsibility (CSR) have been losing ground. Instead, CSR can be taken to be an essential part of understanding a particular business enterprise. It is the merging of a comparative political economy perspective on the corporation with one on the organisational features, structures and processes of the corporation that can help us better understand the distribution of power and knowledge within the ‘learning firm’.

The Turkish Capital Market Board introduced its Corporate Governance Principles in 2003. The Principles are based on the concepts of equality, transparency, accountability and responsibility. While they are generally modelled on the Corporate Governance Principles of the OECD, they also take into consideration the special needs of Turkish company structures and Turkish company law and practice. The Principles apply on a comply-or-explain basis and contain detailed guidelines on the rights of shareholders, public disclosure and transparency, stakeholders and the board of directors. Listed companies are under an obligation to issue an annual corporate governance compliance report showing the extent of their compliance with the Principles and explaining the reasons for any deviation. The board of directors and the company can be held liable by investors for deceiving them with wrong or misleading information contained in the report. As for the actual implementation of the Principles, surveys indicate that there is room for improvement and that more time is needed for full application.

The European Commission's proposal to establish shareholder democracy and mandate the one-share-one-vote (1S1V) rule has drawn much attention and controversy. In the pursuit of a popular appeal for the rule, European Commission policymakers have tried to turn equiproportional representation into something close to an aphorism tied to corporate egalitarian sentiments underscoring justice, fairness and ethics.

Based on law, finance and economics literature, this paper evaluates the economic underpinnings and efficiency of 1S1V and concludes that it is generally a suboptimal corporate voting mechanism compromising economic efficiency and distorting incentives of corporate constituencies. Moreover, it is submitted that any attempt to mandate 1S1V in the European Union may induce companies to move either to pyramidal structures or, worse yet, to use complex derivative instruments to decompose 1S1V. While pyramidal holdings may further facilitate expropriation of private benefits of control as compared to the status quo, the decomposition of 1S1V can: (i) further advance heterogeneity of preferences of shareholders; (ii) create incentives for negative voting arbitrage; and (iii) encourage the approval of value-reducing transactions or, worse yet, become a takeover defence. Hence, even if the European Commission can hypothetically move corporate Europe from controlled ownership structures to minority ownership ones, 1S1V is clearly worse than the status quo, and, paradoxically, instead of advancing the rights of ‘disadvantaged shareholders’, 1S1V can further demote shareholder rights in the European Union.

This article proposes that European Commission policymakers should refrain from taking any measure at the level of the Community and should instead strengthen disclosure rules and the enforcement thereof. Furthermore, some standards of review governing significant conflict of interest transactions can be introduced. It is also submitted that European Commission policymakers can provide opt-in and opt-out provisions for the Member States. Such menus should be once again complemented by rigorous disclosure rules and enforcement mechanisms.

Lower barriers of entry for new firms and more flexibility in structuring a business organisation are the two key factors motivating the introduction of the new company law. In general, policymakers use new company law initiatives to encourage entrepreneurship, innovation and cooperative arrangements. This paper distinguishes the diverse strands of company law reforms arising in the United States, Europe and Asia and points to the underlying conditions that shape the markedly different reform outputs. Our analysis points to three important factors – (1) private ordering; (2) fiscal transparency; and (3) limited liability – that effect the incentives for new firm creation. However, we find that many of the new company law reforms are incomplete. Nevertheless, these new company law reforms retain the ability to generate rents due to their adaptability and responsiveness to social and economic change.

This article examines the role of bid prices for determining the fair value of securities in a subsequent squeeze-out appraisal. The recent Takeover Directive includes a legal presumption of a fair bid price under certain prescribed conditions. The author seeks to identify circumstances that may be regarded as a sufficient reason to reverse the fairness presumption and deviate from the consideration offered in a bid when determining the squeeze-out price. Theoretical underpinnings of the preconditions are also presented. Particular interest is paid to the question what significance may be given, when determining the fair squeeze-out price, to the consideration offered in such a voluntary bid that fails to gain acceptance by a qualified majority (90 per cent) of securities targeted.

This article analyses, from a comparative law and economics perspective, the regulatory regimes for the stabilisation of share prices during IPOs in the United States and the European Union. Pure stabilisation, which is the principal form of stabilisation forms the focus of this study. With respect to ancillary stabilisation, i.e., the overallotment facility and greenshoe option, Germany and Italy are taken as examples for describing the concrete functioning of the discipline in Europe as compared to the United States. First, the article argues that the economic rationality of pure stabilisation may cast doubt on its effective use because of its high potential costs. Furthermore, a credible commitment problem of the syndicate's intervention may lead to a possible discrepancy between the ratio legis of the prospectus disclosure discipline and the ratio legis of the pure stabilisation activity. Second, the article shows that the judgement on the proper working of ancillary stabilisation crucially depends on the binding or non-binding character of investors' adhesions with respect to the final price setting, i.e., on something that is regulated by European law and national contract law.

The many legal forms for business organisations that first appeared in the United States during the last thirty years – the limited liability company (LLC), the limited liability partnership (LLP), the limited liability limited partnership (LLLP) and the statutory business trust – all combine the pattern of creditors' rights, or asset partitioning, that is traditional to the business organisation with the freedom of contract among investors and managers that is traditional to the partnership. To view these new entities as partnership-like is to treat the degree of freedom of contract as the essential difference between the traditional corporation and partnership forms; to view them as corporation-like is to treat the pattern of creditors' rights as the essential difference. While recent scholarship often takes the former view, the latter seems more accurate. History shows that much of the contractual inflexibility in the traditional corporation served merely to buttress its pattern of creditors' rights and that this inflexibility fell away upon the development of substitute sources of investor protection. The new forms are thus better understood as part of the continuing development of the corporate form rather than as entities more akin to the traditional partnership, which has in fact been evolving in a different direction. This article first develops this argument in terms of the trade-off between contractual freedom and the form of asset partitioning that to date has received the most scholarly attention, that is, limited liability. It then explores the evolution of the new forms from a less familiar perspective, focusing on the entity shielding component of asset partitioning.

La Porta et al. have made a number of influential empirical contributions linking the level of investor protection in different countries to the development of capital markets. They find that rules associated with common law are superior in fostering larger and broader capital markets, especially compared to countries based on the French civil law tradition. However, this article argues that the existing methodological approach is problematic when subjected to careful legal analysis based mostly on Scandinavian examples. In particular, one may question the appropriateness of relying on legal indices, as laws by their very nature cannot be stacked like bricks of similar size. Furthermore, it is argued that the notion of investor protection needs to be considered in a consistent, complete and unbiased manner, in which the binary categorisation should be modified. Specifically, due to the ambiguity of formal investor protection rights, it is suggested that the ratio of actual minority votes cast at the general meeting to the total number of minority shares may serve as an alternative proxy for the real degree of investor protection.

In Europe, several models for financial supervision have developed over time: from the traditional three-pillar or institutional model (banking insurance and securities), via the intermediate ‘twin peaks’ model, which is closer to a functional approach, to the single or integrated model. Many elements, including market structure, historical and political factors, have determined each State's choice in favour of one of the models. Several States have recently tried to find more efficient and less costly supervisory schemes. A comparative analysis of the features of these models gives indications about the drivers for choosing one of them and the pros and cons that have been advanced. The actual situation in each of the EU States is described. Some conclusions are drawn as to the regulatory structure at EU level.

In SEVIC, the European Court of Justice (ECJ) held that the refusal of a national commercial court to register a cross-border merger may constitute a violation of the freedom of establishment. In the future, this decision will be superseded by the new Cross-Border Merger Directive. Thus, the importance of the SEVIC decision could be doubted. This note, however, shows that SEVIC has significance beyond cross-border mergers, namely with respect to seat transfers, cross-border divisions and cross-border takeovers.

This paper examines a recently proposed per se rule to automatically treat as equity secured loans granted by shareholders to the corporation on the eve of insolvency. It shows that arguments based on the dual quality of the lender-shareholder are insufficient by themselves to propose such a rigid rule, which would curb potentially socially beneficial loans. Further empirical research is needed to shed light on this issue.

Starting from the suggestion that external costs are created by the plenary private order regime – in short, that ‘private ordering’ is not truly private – the author advocates restrictions based on social welfare, and not traditional fairness, concerns when crafting limits on the extent to which participants in business firms can reorder their relations inter se from the statutorily defined relationship. A constructive start to this discussion would be to acknowledge that private ordering generates costs, some of which are social. Having done so, we could agree that an aggregate net social calculation of value and cost is appropriate to see if plenary private ordering is justified and, if not, to determine the appropriate level of private ordering. This policy discussion provides a valuable reminder of the value of commonality in these matters. Jurisdictions benefit when we adopt common modes of analysis, shared nomenclature and harmonisation statutes. That value of commonality has been too often put aside as we are guided by market-oriented generalisations which focus too heavily on the presumed benefits to individual participants and firms and ignore the social dimensions of public policy formation.

A Bill to amend Dutch private company law is currently pending before the Dutch Parliament. In our paper, we discuss the proposed rules for the protection of creditors of Dutch private limited companies (BVs). In order to give an insight in the background of the proposals, we first summarise our study on alternatives for capital protection, which served as a basis for the legislative proposals. Next, we point out what criticisms were made during the consultation following the publication of the draft Bill in April 2006 and how the legislature responded to these criticisms. We show that certain controversial provisions have been amended as a result of the outcome of the consultation process. Our paper ends with a few remarks on the rather limited amendments made to Directive 2006/68/EC. We conclude that after the implementation of the Bill, the rules on creditor protection applicable to Dutch BVs and Dutch NVs (public companies) will differ considerably. In our view, there is no reason to fear that the new creditor protection rules applicable to the BV will lead to increased popularity of the NV, as has been suggested by some. Time will tell whether the fundamental reform of the law applicable to the Dutch BV renders it well-equipped to contend with foreign competition.

This note reviews the implementation of EC Council Regulation 1346/2000 on insolvency proceedings by UK courts. Two recent decisions in the United Kingdom – Hans Brochier Holdings Ltd v. Exner (HBH) and Re Collins & Aikman Europe SA (C&A) – provide an indication of how UK courts will interpret the Regulation while implementing the United Kingdom's newly established corporate insolvency regime and, specifically, the Enterprise Act 2002 and its overriding objectives. In HBH, the Court's decision to regard the German forum as the company's centre of main interest and thus as the forum for the main insolvency proceedings was influenced by the Court's perception that certain social security protections would only be provided to the company's employees if the company's insolvency was administered in Germany, thus providing the company employees – who formed part of the company's creditors ‘as a whole’ – better protection in insolvency. In C&A, the practice of providing creditors with oral assurances that their respective national insolvency protections would be respected by the administrators was approved by the Court. This is consistent with the purpose of furthering the objective of ‘rescue’, as the secondary proceedings may only be opened with a view to winding up the company.

A reform of the GmbH is underway. The appearance of branches of British private limited companies in Germany in the aftermath of the Inspire Art judgment had a certain impact on the reform discussion. Which strategy should be chosen? The so-called MoMiG reform has decided: Let's face the competition. The reform aims to make the incorporation of a GmbH much quicker, easier and cheaper. It seeks to deregulate some of the complications in German law such as contributions in kind, capital maintenance and cash pooling and rules on shareholder loans that are difficult to understand. It will also reduce minimum capital requirements. Furthermore, the intended strategy is to modernise the company law we have and not to introduce even more and new forms of companies into our law. The MoMiG Act should reach Parliament in spring 2007 and will hopefully enter into force at the beginning of 2008.

This paper focuses on localising network-specific market power in new markets. Three levels of transmission quality in service markets can be differentiated according to the products provided: narrowband services like PSTN/ISDN or GSM, semi high-speed broadband services, like broadband internet access up to 6 Mbps download, and VDSL services up to 50 Mbps. As long as a monopolistic bottleneck exists in local infrastructure networks due to the absence of alternative network infrastructures, the question arises what the remaining bottleneck components are for these different markets. In this paper, the shrinking bottleneck hypothesis will be demonstrated.