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Corporate Law notes of GLOBAL LAW AND TRANSNATIONAL LEGAL STUDIES, Lecture notes of Corporate Law

IMS Unison UniversityCorporate Law

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2022/2023

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Corporate Law
European company law!
20/02/2023!
By Fabrizio Sudiero!
The origins and future of European company law!
Definition of “Company” is provided by the European Court of Justice:!
1. Unlike natural persons, companies are creatures of the law and, in the present state of
Community law, creatures of national law. They exist only by virtue of the varying national
legislation which determines their incorporation and functioning (C-81/87 The Queen v. H.M.
Treasury and Commissioners of inland Revenue).!
2. A corporation is a profit-seeking enterprise (= professional activity organised for the purpose
of producing or exchanging goods or services. Synonym of enterprise is undertaking) of
persons and assets organised by rules. Most of these rules are terminated by the unilateral
action of corporate organs or officials. Some of these rules are determined by mallet forces.
Some are determined by contract or other forms of agreement. Some are determined by the
law (Melvin A. Eisenberg “The Structure of Corporation Law”).!
There is no difference between company and corporation, just company is originally from U.S.A
while corporation is usually from England. !
Two aspects from a juridical point of view:!
-company is a contract between two or more parties (both natural persons and legal persons)
who put something in the company to carry out an economic activity to seek a profit shared
between the shareholders. !
-company is a subject of law. The shareholders thanks to the law create a company which has
obligations and rights. !
Characteristics of a company:!
1. Legal personality = the status, the capital and the resources of the company makes company
acquire a legal personality. What were previously the money or resources of the shareholders
are now of the company. !
2. Limited liability !
-High separation —> limited liability companies (ex: sry, spa). For the debts of the company,
only the company responds. !
-Private liability companies are medium-small enterprise that cannot be listed!
-Public liability companies can be listed!
-Low separation —> unlimited liability companies (ex: partnership like società semplice). The
creditors can satisfy the credits towards the company and the shareholders. !
3. Transferable shares !
4. Delegated management under a board structure !
5. Investor ownership!
—> these characteristics respond to the economic exigencies of the large modern business
enterprise. !
Issue: coordination between participants in corporate enterprise reducing the scope of
opportunism among different constituencies that reduces the overall value of the company. Much
of corporate law responds to 3 principal sources of opportunism (Agency Problems):!
-Conflict btw managers and shareholders!
-Conflict among shareholders —> divergency depending on what they put in the company. !
-Conflict between shareholders and the corporation’s other constituencies, including creditors
and employees!
Problem: defining the interest of the company. Two doctrines:!
-Institutionalism —> the interest of the company is the third party’s interest (ex: employees,
creditors…).!
-Contractualism —> the interest of the company is the interest of the shareholders. Two
approaches:!
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Download Corporate Law notes of GLOBAL LAW AND TRANSNATIONAL LEGAL STUDIES and more Lecture notes Corporate Law in PDF only on Docsity!

Corporate Law

European company law 20/02/ By Fabrizio Sudiero The origins and future of European company law Definition of “Company” is provided by the European Court of Justice:

  1. Unlike natural persons, companies are creatures of the law and, in the present state of Community law, creatures of national law. They exist only by virtue of the varying national legislation which determines their incorporation and functioning (C-81/87 The Queen v. H.M. Treasury and Commissioners of inland Revenue).
  2. A corporation is a profit-seeking enterprise (= professional activity organised for the purpose of producing or exchanging goods or services. Synonym of enterprise is undertaking) of persons and assets organised by rules. Most of these rules are terminated by the unilateral action of corporate organs or officials. Some of these rules are determined by mallet forces. Some are determined by contract or other forms of agreement. Some are determined by the law (Melvin A. Eisenberg “The Structure of Corporation Law”). There is no difference between company and corporation, just company is originally from U.S.A while corporation is usually from England. Two aspects from a juridical point of view:

- company is a contract between two or more parties (both natural persons and legal persons)

who put something in the company to carry out an economic activity to seek a profit shared between the shareholders.

- company is a subject of law. The shareholders thanks to the law create a company which has

obligations and rights. Characteristics of a company:

  1. Legal personality = the status, the capital and the resources of the company makes company acquire a legal personality. What were previously the money or resources of the shareholders are now of the company.
  2. Limited liability

- High separation —> limited liability companies (ex: sry, spa). For the debts of the company,

only the company responds.

- Private liability companies are medium-small enterprise that cannot be listed

- Public liability companies can be listed

- Low separation —> unlimited liability companies (ex: partnership like società semplice). The

creditors can satisfy the credits towards the company and the shareholders.

  1. Transferable shares
  2. Delegated management under a board structure
  3. Investor ownership —> these characteristics respond to the economic exigencies of the large modern business enterprise. Issue: coordination between participants in corporate enterprise reducing the scope of opportunism among different constituencies that reduces the overall value of the company. Much of corporate law responds to 3 principal sources of opportunism (Agency Problems):

- Conflict btw managers and shareholders

- Conflict among shareholders —> divergency depending on what they put in the company.

- Conflict between shareholders and the corporation’s other constituencies, including creditors

and employees Problem: defining the interest of the company. Two doctrines:

- Institutionalism —> the interest of the company is the third party’s interest (ex: employees,

creditors…).

- Contractualism —> the interest of the company is the interest of the shareholders. Two

approaches:

  • The interest of the shareholders is the profit
  • The interest of the shareholders is the shareholders’ value (= value of the shares) Trying to reach a balance between the two doctrine there is the idea to reach a common point between the interests of the community and of the shareholders. In the Company Act of 2006 in U.K. there is the concept of interest of shareholder but taking into account also the interests of other stakeholders. European company law is a cornerstone of the internal market. It facilitates freedom of establishment of companies, while enhancing transparency, legal certainty and control of their operations. At the European level there are as many as 27 different national company laws which in the absence of a uniform discipline, are applied both to local companies and to foreign companies. The overlapping existence of national company laws can act to the detriment of the freedom of establishment of companies. European company law is binding also for the EFTA (European Free Trade Association, composed by Iceland, Liechtestein and Norway + bilateral agreement for a free trade area under World Trade Organization rules after the Brexit). The scope of EU company law covers:
  • the protection of interest of shareholders and others
  • The constitution and maintenance of the capital of public limited liability companies
  • Branch disclosure
  • Mergers (fusione) and divisions
  • Minimum standard for single-member private limited liability company
  • Shareholders’ rights
  • Legal entices such as the EEIG, SCE, SE. The most recent Directive 2017/1132 on EU Company Law sets forth the following objectives:
  • The coordination and harmonisation of (rivedi) European company law is not comparative company law. The legal rules and principles of company law are enshrine in the sources of law of the EU. Companies incorporated in and/or operating in any of the Member States of the European Union are regulated by the company law of the Member States. However, (rivedi). 21/02/ When an entity is relevant to European company law? According to art 26 TFEU: the internal market shall comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of the Treaties. This concept must be split into two concepts:
  • freedom of establishment —> enables an economic operator to carry on an economic activity in a stable and continuous way in one or more Member States. If we want to incorporate (= to create) a company abroad there is the right to do so with the same conditions of nationals. Article 49 TFEU: restriction on the freedom of establishment of nationals of a Member State in the territory of another Member State should be prohibited. Such prohibition shall also apply to restrictions on the setting-up of agencies, branches or subsidiaries (= a company that is owned or controlled by a parent or holding company) by nationals of any Member State established in the territory of any Member State. Freedom of establishment shall include the right to take up ad pursue activities as self-employed persons and to set up and manage undertakings, in particular companies or firms, under the conditions laid down by Member States where such establishment is effected for their own nationals. Are associations and foundations beneficiaries of this freedom of establishment?
  • Freedom to provide services —> enables an economic operator providing services in one Member State to offer services on a temporary basis in another Member State shout having to be established. There is no need to incorporate a company abroad to provide services. Article 56 TFEU: restrictions on freedom to provide services within the Union shall be prohibited in respect of nationals of Member States who are established in a Member State other than that of the person for whom the services are intended. Article 54 defines the meaning of companies and firms: “companies or firms” constituted under civil or commercial law including cooperative societies and other legal persons governed by public or private law save for those which are non-profit-making. Analysis of this article:
  • The register office
  • Figures of the company
  • Right of shareholders to withdraw from the company
  • Article of association contains the internal rules of functioning of the company
  • Statute contains the internal rules of functioning of the company 22/03/ The Legal Capital When we want to incorporate a company we have to contribute with sth (ex: capital, money..) in order to carry on the company. The concept of legal capital and the overall assets of the company are different concepts. The legal capital is a part of company assets, is the sum of assets contributed by its shareholders in exchange for shares. This sum is normally established in the instrument, in the register and in general in company acts and contracts —> to sum up: when we incorporate a company we contribute and we form and create a legal capital. A company may acquire goods, a sum of money, and some assets can change and could be less or more than the starting legal capital of 10.000, but the legal capital sum is a formal sum that has to be guaranteed. Ex: we can have a company with a minimum legal capital, after that, we start our activity for a total asset of higher value, but let's make that we lose some money. The legal capital it’s part of a company that constitutes the guarantee for third parties that know surely that this amount has to exists. Third parties have to know if their counterparties have the capital or not, if a company loses the legal capital, and this is below the one provided by the law there is the dissolution of the company, a measure as protection to the third parties. The existence of the limit to a legal capital is more for its existence rather than its amount. If a company arrives below the minimum of legal capital, the dissolution of the company occurs. 3 different concepts of legal capital:
  1. authorized capital = max amount of assets that the directors are authorized to rise from the shareholders or third parties as a contribution in the exchange of shares.
  2. subscribed legal capital = the amount of contributions that the shareholders are required to pay. When we decide to increase the capital the shareholder can decide to contribute and how, but when you decide u undertake to pay the legal capital, the moment in which you assume the obligation is the subscription of legal capital.
  3. issued and paid legal capital = total amount paid by shareholders. Until the moment the contribution is said to be full, the shareholders are debtors of the company, because they have to undertake the subscription to pay. Ms normally in their legislation allows the possibility to shareholders to subscribe part of the legal capital that they decide, but to pay only a part of what they undertake to pay, normally (depends on each Ms) the 25%. Example: if we have 10.000 euros of legal capital and we are 2 shareholders, so each has to pay 5000 if 50%, so each of us has to pay 25% of it. The shareholders have to pay the difference when the directors ask us. Shareholders are gently and severely liable for debts—> in general the protection is max to the creditor, who can require the payment of each debtor of the tal amount after that if one pay the all operations linked to legal capital are subjects of general meetings competence. General meetings have the competence sometime to be authorized to increase the capital to shareholders, not only reduce it. When there is a problem of value of a company? When the capital is made of goods and they can increase or decrease in value during time. Also if a shareholder contribute with a higher value, then he expects higher power which could damage third parties and the other shareholders. Shares (In partnerships we have quotas, not shares) In general, shares are goods that give rights to the owner —> both patrimonial rights (the right to obtain the distribution of ownership) and administrative rights ( the power to say sth, to vote, to attend general meeting).

There is, in general, a specific rule of the equal treatment of the shareholders, which shares has to have the same rights to the shareholders but we’ll see that this concept has been analysed, declined in a particular way cuz thanks to som eu provisions, the concept is related to the subjects that re to the same situations. therefore we can create specific categories of shares:

  • those without voting rights, but with more patrimonial rights→ there is a sort of compensation, normally provided by the law The corporate governance
  • rule governing the organization of the company
  • sets of relationships between companies management for its shareholders ìand other stakeholders, and how to deal with the agency problems Possible organs of a company:
  • general meeting
  • the board of directors
  • supervisory board/ auditors 3 different kinds of structure in corporate governance
  1. One-tier system —> general meetings that appoint the management board that appoints the supervisory board, namely the controller. we have some directors that have to have specific characteristics of independence guaranteed by law. Here, we have surely a problem of possible loyalty of the subjects that actually are all directors controlled by other directors, but if they are independent there is no problem.
  2. Two-tier system —> we have the general meeting that appoints the supervisory board, so the controller and the supervisory board appoint the management board. The formal separation between ownership and management.
  3. Traditional or Latin system: mainly the Italian one. we have general meetings that appoint and remove both the administrative organ and the supervisory organ. GM has also the power to approve the annual account and the liability of the organs. It depends on who I am if I’m the majority shareholder it would be okay for me to appoint them if I’m the minority one the power is limited by the majority shareholders. the supervisory board is composed of subjects that are elected by the employees, so there is employee representation in the corporate governance - the enterprise enters into governance. 1 and 2 have different structures and rules, but also things in common. Now to have some example we can take into account the atin system to analyse the structor and institutions of the organs. General meetings General meetings have the competence to appoint and remove the organs, here we should focus on 2 aspects of private law:
  4. the concept of liability for debts —> we have a creditor and a debtor and the latter has to pay the first
  5. liability for damages —> sb damages another subject for the omission of acts, like a car accident, the credit of debt arise after the accident and the creditor that suffers damage and the creditor owes him money. In company law we have not only unlimited liability but to protect third parties there are specific rules on liability of organs and on legal capitals. If a company can’t pay because of a fault of the director, he responds for the damage caused to third party or director can responds for the company if he damages the company. So general meetings normally have the power to decide whether to sue or not a director in the case in which the latter damages, not the third party, but the company. When a General Meeting approves this decision to sue the director, after that another director has to take this resolution and go to the lawyer, rights the rights and go to court for the procedure. We have to go to court. What is the effect of the procedure to remove a director? It would be substituted, because I want to prevent further issues, or I just don’t like the way in which it works.
  • addresses: public and private companies (not partnerships)
  • The most recent addition to the body of EU company law is Directive 2017/ Criticism to European Company Law (ECL) Legal scholars maintain that ECL has trivial influence on the company law of the Ms —> Luca Enriques argues that:
  1. ECL doesn’t cover core corporate law areas like fiduciary duties and shareholder remedies.
  2. ECL rules are under-enforced. This is because lawyers normally don’t know ECL.
  3. Due to sporadic judiciary interpretation by the CJEU, ECL tends to be implemented and construed differently in each Ms according to local legal culture and in a manner that is consistent with prior domestic corporate law provisions.
  4. Ms would have probably legislate issues even without the existence of European Community.
  5. Most ECL rules can be categorised as optional, unimportant or avoidable EMCA Project The objective of the project is to bring about—on a solid scientific found- ation—a new way forward for European company law. Therefore, inspired by the US Model Business Corporation Act, the aim of this project is to develop the European Model Company Act (EMCA). The EMCA will be designed as a free- standing general company statute that can be enacted substantially in its entirety by the Member States, or they may enact selected provisions of the Model Act. This approach differs from previous European company law initiatives as it is a general settlement of the debate on which of the two regulatory approaches is superior—regulatory competition or harmonization. The EMCA will offer the Member States a harmonized company law, but leaves it to each Member State to decide whether it will offer its businesses the advan- tages given by harmonization. The major benefit from an integrated company law framework is that it establishes similar conditions for company sharehold- ers and third parties all over the EU, thus facilitating cross-border investment and trading by ensuring shareholder rights and rebuilding investor confidence. However, at the same time the EMCA allows for special local considerations and for experimentation with new or different ideas, as Member States are free to opt out of parts of the Model Act in order to implement national company law innovations. Formation and disclosure 1. The first Company Law Directive of 1968 (later replaced by a directive of 2009) laid down:
  • generale rules on setting up limited-liability companies, capital and disclosure requirements, covering the disclosure of company (good faith), document and validity of obligations entered into by a company and nullity (provisions that restrict the grounds on which the obligations entered into in the name of the company are not valid; inc cases in which nullity can arise and the retroactive effect of a declaration of nullity must be restricted)
  • Applying to all public and private limited-liability companies limitations of power of the company:
  1. Legal limitation —> scholars discuss on this topic:
  • the appointed director has been appointed on the basis of resolution (= decision of the General Meeting) that isn’t valid.
  • Holzmuller (= case law that creates a doctrine) —> some competences are provided by the General Meeting but some of them are not expressed but still exist
  1. Contractual limitation
  2. Statute limitation 2,3 represent cases in which shareholders specify the limit of powers of director (ex: setting a price limit at which the director needs the approval by the shareholders). This directive is completed by the 11th Directive of 1989 which governs the disclosure requirements in respect of branches opened in a Ms by certain types of companies governed by the law of another states. It:
  • Introduces disclosure requirements for foreign branches companies
  • Applies to EU companies that set up branches in another EU country or companies from non- EU countries setting up branches in the EU The 12th Directive of 1989 provides a framework for setting up a single-member company, in which all shares are held by a single shareholder. Why would it be useful for someone to incorporate a single shareholder limited liability company? Shareholders in a corporation are not liable for the company’s debts. If the company goes bankrupt, shareholders are protected, while creditors’ recourse is normally limited to the assets owned by the company. The 12th Directive covers only the private limited-liability company but EU countries may decide to extend it to public limited-liability companies. 2. Second Company Law Directive of 1976 (later replaced by the Directive of 2012 and later replaced by the Directive of 2017) covers:
  • The formation of public limited-liability companies
  • Rules on maintaining and alter their capital
  • (^) nb. Setting minimum capital requirements (25.000 euros for EU public limited-liability companies)
  • (^) nb. Regulates the acquisition of and financial assistance for a company’s own shares and expresses a principle of equal treatment for all shareholders that are in the same position. 28/02/ When a company acquires its shares from the shareholders it … by back. The protection if shareholders and creditors requires not only restriction on the company’s right to acquire its own shares but a comprehensive regulation of all transactions on a company’s own shares such as the subscription, the acquisition and the financial assistance, either directly or indirectly enacted by the gomonay’s directors. Merger leveraged byout = financial operation —> a small company decides to buy a part of a bigger company and they merger themselves. The small company has not enough money to buy 51% of the bigger company and so the small asks for a loan to the bank and buys (the shares —> contract between the small company and the shareholders of the bigger company) the 51% of the bigger company. The small company is the shareholder of the big company. The small company controls the bigger company and decide to merger themselves. So at the end there is just one company. The small company has a debt to the bank. At the end of the merger the debt passes to the sole company. The bigger one is guaranteeing the loan because in case of merger, rights and duties of the small company result in the bigger company. At the end of the merger the only company responds to the the liability (ex: to the bank). Regarding the protection of shareholder, the principles of equal treatment of shareholder is worth mentioning —> originally linked to decisions on the increase ad reduction of capital, this principle later acquired general application to all transactions governed by the Directive. In 2006 che principle was expressly reiterated for the acquisition of a company’s own shares. Recital 35 and 47 of the Directive (see the book) explains why the minus legal capital is important and why it is necessary to have rules on maintaining the legal capital and prohibition the free distribution. In all situations ECL provides rules to protect creditors and third parties (ex: opposition to some operations). 3. Third, Tenth and Sixth Directives deal with cross-border mergers (created to facilitate the freedom of movement and to facilitate the market). It specifically deals with:
  • establishing the validity of the transaction itself
  • providing a common framework on how merges between two companies formed under the laws of different Ms should be achieved 2 kinds of merger:
  • merger by acquisition —> one comply buys the other
  • merger by the formation of a new company —> two companies merge creating a new company

The commission proposed an option to Ms to adopt one-tier or a two-tier structure (freedom to choose … rivedi). For companies choosing one of the two structures, worker’s … rivedi

  • director’s liability —> the proposal aimed at harmonising provisions with regard to the civil liability of the member of the management and supervisory organs.
  • General Meeting and shareholder’s powers. 01/03/ Recupera lezione 06/03/ By Giulia Proietti Freedom of establishment = freedom to establish where to carry out the activities. Freedom of establishment creates competition among states (before Brexit, UK was the most favourable because of the language and because there is no minimum capital). Art 49 TFEU on prohibition of restrictions on the freedom of establishment. According to this article the freedom of establishment must be guaranteed by the national law. There are 2 kinds of f.e. :
  1. 1° establishment: right to set up a company in any state at the same condition set up for the nationals. Example of cases:
    • Daily Mail case —> wanted to cease to be resident of UK so it wanted to move to the Netherlands its central management and control. The reasoning of this decision was tax because Daily Mail wanted to sell part of the assets of the company but in UK they would be subject to capital gains (= form of taxation), while in Netherlands this capital gains would be considered only for the increase of value after the transfer. Netherlands allow foreign companies to set their management there. Under UK Law, the company has to apply for consent for the transfer but Daily Mail opened its office in Netherlands without waiting for the consent. ECJ decide that the Treaty confers no right on a company incorporated under the legislation of a Member State and having its registered office there to transfer its central management and control to another Ms. The right of first establishment doesn’t include the right of free movement of corporations to trader central management and control to another Ms.
    • Uberseering case —> U. Was a dutch company that bought a piece of land in germinate and hired NCC corporation to make construction work on it. U was later acquired by 2 Germans (the company was incorporated in Netherlands, the shareholders are German and the main activity is in Germany, Germany is a “real seat” state). U claimed damages against NCC in German courts. The German courts said the under German law U was considered transferred in germans in Germany and as a dutch company didn’t have any legal capacity in Germany. If a corporation in a state A is deemed under the law of another state to have moved its center of administration in state B, it must be recognised legal capacity in state B.
  • Sevic case —> Sevic is a German company that wanted to register the merger with the Luxembourg company. German law didn’t allow registration of the merger btw a German and a non German corporation. The right of establishment cover all the measures that permit or even merely facilitate access to another Ms and the pursuit of an economic activity in another State, including cross-border mergers. Restrictions can be justified only for the protection of creditors, minority shareholders and employees.
  • Cartesio case —> Cartesio is a Hungarian limited partnership and the partners are Hungarian and reside in Hungary. In 2005 Cartesio applied for registration of the transfer of its seat to Italy but they wanted to be subject to Hungarian law. This was rejected. The ECJ reaffirmed the Daily Mail doctrine. Companies are not free to mover their real seats while retaining the legal status in one country if the national law of such country doesn’t permit so.
  • Vale case —> Vale is an Italian company request di be cancelled from the registry since it will transfer its seat and business to Hungary. The roman registry cancelled the corporation based on the “removal and transfer of seat”. When the company applied in the Hungarian registry, it stated that Vale was it predecessor-in-law (= Vale was the previous one before the one in Hungary. This is the cross-border conversion). Capital was paid up according to

Hungarian law. The new registration was denied, as according to Hungarian law, only Hungarian could be predecessor-in-law of a corporation). National law of the host Ms can determine the national law applicable to cross-border conversions and all the requirements necessary for such operation, but cannot prevent registration if the conversion would be allowed for national corporation.

  • Polbud case —> P. Is a limited company in Poland that wanted to transfer it registered office (= sede legale) (but not the head office) in Luxembourg. Poland is an “incorporation theory” state. (rivedi)
  1. 2° establishment: set up agencies (= office) and subsidiaries (= branch of an already existing company)
  • Segers case —> Mr. Segers and his wife (both dutch) acquired the the shares of SlendRose (= British company). Mr Segers became the director and the activity was carried out in Netherlands. The company is registered in UK, an agency is in Netherlands. The director of the company requested to be covered by insurance in the Netherlands by the state refused based on: the fact that Mr Segers wasn’t an employee and that we was a director of a company incorporated under a foreign law. Under dutch law directors who won at least 50% of shares are covered by insurance. ECJ stated that if a company has exercised its rights of freedom, a state cannot exclude the director from insurance benefit only on the ground that the corporation was formed in accordance with the law of another Ms.
  • Centros case —> Centros company was registered in UK with no minimum capital required to register a branch in Denmark. The shareholders were two danish national residents in Denmark. The danish register refused the application based on the fact that this was q way to circumvent the Danish rules on capital (danish law requires 27. euros minimum capital). All the business was carried out in Denmark so the intention was to transfer the principal establishment. ECJ stated that Ms cannot prevent a company formed under the law of another state to set up a branch in their state, even if the reason is to avoid more restrictive regulations. In a single market the freedom to choose the least restrictive legislation is inherent.
  • Inspire Art case —> Inspire Art is a UK corporation and the sole director was in Netherlands authorised to act alone. The company registered a branch in Amsterdam. The dutch register sent an order to require that the company registration indicated that the company was formally foreign. Inspire Art refused. ECJ states that Ms cannot imposed additional disclosures to companies exercising the right of 2° establishment. The fact that the corporation is formed in a state and carries its activities in another, is not a proof of fraudulent behaviour. The right of 2° establishment includes the right to register a branch in another state, even when the company doesn’t carry any business in the state where it is registered. States cannot treat differently shareholders or directors of companies incorporated under different sate law solely on this ground. Gebhard test:
  • Measures must be applied non discriminatorily
  • Must be justified by imperative requirements
  • Must be suitable for securing the attainment of the objective
  • Cannot go beyond what is necessary to attain the object
  • freedom to provide services —> Article 56 TFEU states that restrictions on freedom to provide services shall be prohibited. Article 58 TFEU states that article 56 doesn’t apply to the field of transport. Uber case —> they stated business in a legal tray area camouflaging their operation. A professional association representing taxi drivers in Barcelona brought an action vs Uber (rivedi). If Uber falls under the definition of “transportation service” it is under article 58, while if it falls under “information society service” it is under article 56. 7/03/ Cross border mobility = possibility to modify the location of the corporation changing the applicable law. This is ensured for the EU corporations: SE (Societas Europea), SCE (Corporative), EEIG (Groups).

- Mergers of limited liability companies must be formed according to one Ms law - Must have at least the registered office, the central administration or the principle place of business in one Ms - Must not do overdoing liquidation Recital 5 “5. The lack of a legal framework for cross-border conversions and divisions leads to legal fragmentation and legal uncertainty, and thus to barriers to the exercise of the freedom of establishment. It also leads to the suboptimal protection of employees, creditors and minority members within the internal market.”. Cross border conversions is an operation where a company without being dissolved or wound up, converts the legal form from the departure Ms (= the Member State in which a company is registered prior to a cross-border conversion) into the legal form of the destination Ms (=a Member State in which a converted company is registered as a result of a cross-border conversion) and transfer at least its registered office while retaining the legal personality. The procedure is based on the idea that the law of the departure Ms governs the part of procedures to obtain the pre-conversion certificate and the law of the destination Ms governs those parts following receipt of the pre-conversion certificate. 1. Writing of a draft must include the name of the resulting company, the new address, the new statute ad the date of the planned conversion, safeguards to creditors and cash offers for those shareholders that vote against it. It must be published at least 1 mother before the date of the decision and creditors and employees can present comments 5 days before. There must be a report from the administrative body for shareholders and employees explaining the economic reasons for the conversions and it must be available though electronic means at least 6 months prior to the decision. There must be also an independent expert report available at least 1 month prior to the decision. 2. The approval by the shareholders in general meeting and those who vote against can request compensations and exit the company. 3. Pre-conversion certificate is released by the departure Ms from competent authority and transferred to the destination Ms through electronic means to have a check by the competent authority. 4. Registration: - In the departure Ms is characterised by the removal of the company, the date of the removal and the registration number, name and legal form of the converted company - In the destination Ms is characterised by the date of conversions and the registration number, name and legal form of the cancelled company. All the assets and liabilities of the company, including all contracts, credits, rights and obligations, shall be those of the converted company. The shareholder of the company shall continue to be shareholder of the converted company, unless they have exited the company. Italy enacted the directive this year. 13/03/ Formation of the company Characteristics of corporations:

  1. Legal personality = the basicity to enter into contracts, take out loans, sue others, be sued, own assets, pay taxes…This personality is different from the one of the shareholders.
  2. Indefinite life or if definitive, not corresponding to the one of the shareholders
  3. Limited liability —> shareholders risk losing only the capital they initially invest in the company. So if the company goes bankrupt, the shareholder isn’t personally affected by it.
  4. Transferable shares/participation —> the transfer if right to a portion of ownership (in partnership this can’t be done without the consent of the other partners). In selling participation, the buyer acquires the profits and the voting rights.
  5. Delegated management = board of directors = a group of nominated directors manage the company in the interest of the shareholders.
  6. Investor ownership/shareholders voting —> shareholders are convicted at least annually for specific decision (ex: approval of the annual financial report).
  1. Capital lock-in —> shareholders don’t have the right to receive back their capital until the company continues business. Only when the company is dissolved (liquidation) or if they exit the corporation (ex: refusing cross-border conversion). NB. There are two types of limited liability companies:
  • private limited liability companies (in Italy S.r.l) are also closed “closely held companies”. The transfer of the participation can be subject to specific conditions (ex: right of first refusal —> A wants to sell its participation to B for 10.000 euros. The other shareholders can by the shares for the same price and avoid B from entering the company). Examples of p.l.l.c are bars, restaurants and little stores. In most states there is no minimum capital (in Italy a regular S.r.l. required 10.000 in the past)
  • public limited liability companies (in Italy S.p.a). Those are subject to more strict rules and have a minimum capital and in Italy is 50.000 euros. The shares are transferrable. Examples of p.l.l.c are Fiat, most bank, supermarkets. 3 step process:
  1. Redaction with two documents:
  • instrument of constitution, it dictates who are the shareholders, the composition of the administrative bodies, the starting capital and each one contributions
  • statutes/bylaws, dictates the rules of the company, how to nominate directors, convocate the assembly and to make modification to … Directive 2017/1132 —> statues must make it clear the basics of the company (capital, objects, type and name of the company, rules to appoint directors, duration).
  1. Preventive control must be done by an administrative authority, judicial authority or a notary. The control is required by ECL. Art 10 states that drawing up and the certification of the instrument fo constitution and the company statues .. (rivedi). In Job Centre case, a company in Italy wanted to have as its object to be an intermediary in the job market btw employers and employees, the Italian law prohibits such object, as intermediaries in the job markets are only public agencies. The registration of the company was denied. The corporation appealed to CJEU which initially dismissed the case as it wasn’t part of its jurisdiction but after the case has became judicial, CJEU ordered the registration because a ban on it was a violation of art 106 and 110 TFEU. CJEU stated that if public placement offices are manifestly unable to satisfy demand on the market for all types of activities, Ms cannot prohibit the creation of a company with this aim.
  2. Entry in Public Registry. In this phase:
  • Information must be public
  • Information must be available to all the parties
  • Information must be sent electronically
  • Data must be obtainable by application (ex: at the Camera di Commercio)
  • Paper copies myst be certifies as “true copies” by the state
  • Ms must guarantee the authenticity and integrity
  • Disclosure must be effected through publication in the National Gazette or through effective means where informati can be accessed in chronological order through a central electronic platform
  • Documents myst be relied on by the company as against third parties if the are disclosed as above For branches art 10 of Directive 2017/ The information of the registry must be published in another EU language and the translation must be certified. The Corp Tech Directive of 2019 = directive enacted to make sure that most of things and info could be accessible online. According to this Directive, states are required to set up rules for online formation of corporations. For private l.l.c. there’s the possibility to create a company online —> in Italy there is a web conference on a notary platform. 14/03/ Validity of obligations by the company Since companies are legal entities, have the legal capacity. Before a company is registered, it is at an intermediate stage —> if a company at this stage takes an obligation (ex: opening the bank account to put the shares of the shareholders). In Germany and other states, at this stage the

Single member company Generally companies must be formed by at least two people. The lack of enough shareholders is both a cause fo dissolution and a cause of nullity according to art. 6 of the Directive 2017/1132. However, ECL introduced a duty for Ms to permit private limited liability companies with a sole shareholder through a unilateral act. To protect creditors, ECL requires specific obligations:

  1. Additional disclosure in the registry (art. 3 of the Directive 2009/102) —> where a company is a single-member company it must be written int he registry.
  2. All decisions taken by the sole member in the field of general meeting must be made in writing (art.4 of the Directive 2009/102).
  3. Ms can request even more obligations for the purpose of protecting creditors (art. 2 of the Directive 2009/102). 15/03/ Visiting professor See slides Corporate governance in the boards and gender balance in the EU 20/03/ Formation of the Societas Europea = public limited liability corporation introduced in all Ms. There are 3 types of it:
  4. European Economic Interest Group
  5. Societas Europea
  6. Societas Cooperative Europea (= corporation whose scope is to give its members products or services at better conditions than the market’s ones). Its minimum capital is 30.000. Drafts of other types: Societas Privata Europea (for private limited liability company), European Mutual Society, The European Foundation, the Societas Units Personae. Characteristics of Societas Europea - Created through the Directive 2001/ - It operates across the EU under a uniforms single statue and a single juridical form - It is disciplined by EU law and by national provisions of public limited liability companies for what isn’t regulated - Minimum capital 120. - Its creation is published in the Official Journal of EU - Subject to taxes in EU countries where it has administrative centre - Mandatory model of employees involvement —> under some law (ex: German law) employees must be involved in the governance of the company. The model is selected by agreement btw management and employees only if the employees already benefited of it before it was a SE. Famous SE in Europe: LVMH, Allianz, Airbus Beffe the directive on cross-border mobility, SE were the only commercial companies that benefited from complete freedom of establishment both secondary and primary. Thanks to SE, you can transfer btw state without the need to convert it into a new legal form. SE gives possibility to confirm its European identity. Creation Nb. SE cannot be created immediately there must be at least 2 operating companies in 2 different states. Ways to establish SE:
  7. By merger (can only occur btw 2 public limited liability company), in 2 ways:
    • By acquisition
    • By formation of a new company
  8. By establishment of a holding company or subsidiary —>the promoting company continue to exist and creare a new company (SE) with new contribution from shareholders. In this case they can be both private and public limited liability companies. The conditions are: - 2 companies in 2 different Ms - Or a company in a ms with a subsidiary in another Ms for at least 2 years The shareholders have 3 months to decide if they want to contribute with their shares to the formation of the capital of the SE (120.000 euros).
  1. By conversion into a SE (only for public limited liability companies who have subsidiary for 2 years in another Ms). This company converts itself into SE. The administration must draft the terms indicating the impaction for shareholders.
  2. By incubation —> a SE already existing creates a subsidiary SE (81% of SE are created this way). Incubation is the only case in which there can be a single-member shareholder for public limited company. Legal capital = sum of assets contributed by shareholders to a company. It attributes rights and obligations to the shareholders. This sum is disclosed in public registers and I the annual financial statement. The legal capital is a way to protect creditors. Example: A,B and C want to create a company. A puts 1000 euros in cash, B puts 1500 in goods, C puts 2500 in cash. Total capital 5.000. A has 20%, B has 30% and C has 50%. Each shareholder has voting rights corresponding to their participation. Each shareholders has right to profits corresponding to its shares. Art. 4 of Regulation 2001/2157 states that the capital for SE is 120.000 euros. Capital formation —> capital can refer to:
  • Subscribed capital = capital that the shareholders are obliged to pay to the company. Under EU Law when shareholders subscribe capital they assume its obligation yo pay for it. They must pay 25% and the rest of it when the directors says so.
  • Issued and paid up = capital that the shareholder have actually paid
  • Authorised capital Shares = fractions of company that have the same value
  • shares are equal
  • Shares are transferable
  • Shares measure the shareholders’ interest in the company
  • Shares give rise to rights —> some companies have categories of shares (ex: right to vote but less distribution rights).
  • Nomina value