5th European Company Law and Corporate Governance Conference Berlin, 27 and 28 June 2007

1. 5th European Company Law and Corporate Governance ConferenceBerlin, 27 and 28 June 2007 Company mobility – Does Europe offer the right framework? Stefano Micossi Director General, Assonime

2. Company mobility in the EC law: the traditional approach • Traditionally, European company law has addressed substantive harmonisation of national laws, much less issues involving cross-border mobility; harmonisation limits forum-shopping and regulatory competition • Under Art. 44(2g) of the TEC harmonisation as an instrument for establishing the internal market – Art.s 43 and 48 require free primary and secondary establishment • The right of primary establishment: covers participation in the incorporation of a company in another member state and the transfer of seat from one member state to another • In practice more common the situation where companies create a secondary establishment in the host state by setting up branches and subsidiaries

3. Real seat vs. incorporation doctrines • Transfer of the legal seat of a company more often than not seen as a disgrace • As a consequence, emphasis on the ‘real seat’ doctrine – whereby the applicable law is that of the member state where the company has its head office and principal place of business • A 1968 Convention on the mutual recognition of companies between the Six accepted the real seat doctrine; but it never entered into force since the Netherlands refused to ratify, having in the meantime shifted in its domestic legislation to the ‘incorporation’ principle – whereby the legal seat is the place of incorporation

4. Company mobility: the ECJ upheaval • In her decisions, the ECJ first struck down all requirements by the member states that business be conducted through a primary establishment (e.g. Commission v. Italy; Segers) • With Centros (1999), the Court ruled that a company could incorporate in state A with lenient rules and then, based on Articles 43 and 48, set up a branch in state B, thus circumventing state B’s onerous rules of incorporation – the real seat doctrine as an obstacle to free establishment • Uberseering (2002) required German courts to legally recognize legal capacity to companies validly formed under Dutch law, even if they are not incorporated under German law • In Sevic (2005) the ECJ clarified that a company resulting from cross-border mergers could not be refused inscription in national registers where registration would be possible for two national merging companies

5. The European Company Statute (ECS) • The ECS entails mutual recognition of national company laws, but the practical impact of this principle is stifled by reference to the real seat doctrine in the determination of the legal seat, and the requirement that the EC be set up only by existing companies • Therefore, following the ECJ decisions recalled above, the ECS has become obsolete since it requires that the registered office of an EC is to be located in the same member state as its head office (art. 7) • In its February 2007 Communication on the simplification of company law, the European Commission has stated that it will undertake a review of the ECS by 2009

6. Regulatory competition within the EU • ECJ decisions have strengthened freedom of establishment as well as the application of mutual recognition of national company laws – harmonised rules play an important role in the protection of shareholders and savers – tension between two forces • Regulatory competition: quality of national rules and judiciary in adjudication of controversies and bankruptcy law important in influencing incorporation seat • Regulatory harmonisation creating common platform of protection: stronger effects on listed companies, subject to harder rules for investor protection

7. Takeover rules • Company mobility is not only affected by the possibility to transfer the registered office and/or the head office or by the possibility to merge, but also by the possibility to take-over another company • On this, the directive on company take-over is a setback for company (capital) mobility, due to its optional clauses that de facto make it possible for management to block takeovers – Germany and France making extensive use of this option

8. The right framework for company mobility • Legislative instruments enhancing regulatory competition: • Cross-border merger directive (2005/56/CE) – limit: workers’ participation rules may not be scaled down • Single prospectus directive (2003/71/CE) – interesting example: an unlisted Italian company controlling a second company incorporated in Luxembourg, but listed in Milan Borsa – which got its prospectus approved by the Luxembourg FSA • The Commission is working on a directive on the transfer of the ‘registered’ office of companies (‘registered’ as opposed to ‘main seat of business’), that would lay down rules for the protection of shareholders, workers and creditors in case of transfer of legal seat – consultation completed in 2004, no draft proposal yet • De facto, we live already in a regime of full regulatory competition – EU legislation perhaps needed to strengthen protection of shareholders and creditors – workers’ participation rights will inevitably be diluted