Differences between countries

1. Differences between countries TAIEX Ana Maria DOBRE Chisinau, 14 - 15 May 2012

2. Differences between countries Inside EU, there are different legal traditions and culture embracing a common set of values, but also national legal identities. Within this diversity, the EU normative initiative, aims at creating converged rules of positive company and corporate law able to achieve an efficient management and to promote efficiency on the grounds of corporate governance.

3. Differences between countries Harmonisation achieved mainly by means of hard law: • Regulation – directly applicable in all MS, generally applicable and binding on all MS, individuals, companies; • Directive – binding as to the result to be achieved, but MS has choice of form and method. Must be transposed in national laws. But also soft law: eg. Recomendations;

4. Differences between countries • Legal transplants “The moving of a rule or a system of law from one country to another“/ “from supranational level to national level” (W.A.J. 'Alan' Watson); • The reasoning for borrowing rules that seemed to be effective in other legal systems is based on the notion of “prestige”- Usually, reception takes place because of the desire to appropriate the work of others. The desire arises because this work has a quality one can only describe as "prestige." R. Sacco, Legal Formats, A Dynamic Approach to Comparative Law, 39 Am.J.Comp.Law, 1991, 1 and 2.

5. Differences between countries • The influence of the UK Corporate Model in the corporate taxonomy of EU Member States supports this believe. • W.A.J. 'Alan' Watson argues that legal transplant are capable to change values, even though the receiving legal order is not traditionally embracing the transplanted legal institution. Alan Watson, Law Out of Context, Athens, Ga., 2000, p. 1., see also Pierre Legrand, 'Against a European Civil Code', 60, Modern Law Review, 1997, pp. 44;

6. Differences between countries However, in the world of legal globalization, transfer of knowledge becomes fundamental within the legal market, only if it is capable to, in long term, change identity. Geroge A. Akerlof, Rachel E. Kranton, Identity Economics, Princeton University Press 2009; The “black letter laws”, together with the Corporate Governance Codes, elaborated by the Member States, are meant to balanced relations based on information asymmetry, to restore consequently investor’s confidence and to enforce accountability, but especially to shape a new paradigm of behaviour, as a prerequisite for sustainable corporate mobility (George A. Akerlof and Robert J. Shiller, Animal Spirits, Princeton University Press 2009).

7. Differences between countries • The drafting of a regulatory framework, in terms of corporate governance, is most of the time crafted in reaction of an event. Eg: Hopt and Leyens describe in “Board Models in Europe Recent Developments of Internal Corporate Governance Structures in Germany, the United Kingdom, France, and Italy” that after the Enron debacle the alignment of internal devices and independent external auditing has become a major focus of interest in all countries considered.

8. Differences between countries These rules are created top down with an intention to be enforced bottom down in order to create a social desirable result. What often is left out of the equation is that rules have to fit the “primary reality” of the addressees of the normative acts. See for this term W. Mansell, B. Meteyard, A. Thomson,A Critical Introduction Into Law, Cavendish Publishing limited: London 199. Primary reality is used as a term to indicate the shared values on macro and micro level of a nation and society, cultural values.

9. Differences between countries Study case: Peculiarities regarding the transposition of Second Company Law Directive Minimal harmonization • MS are allowed to choose stricter rules/or chose the minimum requirements put forward by the directive, in accordance with the Governmental approach to EU actions, in the field. • Eg. UK: “company law should be seen primarily as facilitative, providing the key vehicle – the limited company – through which enterprise and entrepreneurship may flourish” http://www.bis.gov.uk/files/file14584.pdf; • Other countries: protection of both shareholders and creditors=>stricter rules;

10. Differences between countries Only the public companies limited by shares (the most important business firms at that time) • the use of this legal form is very different among the states: in the Southern European states, the SA form is frequently used also for small business firms, while in the UK or Germany, the SA form is still reserved to the larger entities. • The private companies limited are not subject to the directive, but many legislators have extended the rules to these entities as well. • As this was not governed by the directive’s safeguards, the net outcome is quite diverse: in some jurisdictions, the same rules apply, in others only part of the rules apply to the private companies, offering interesting alternatives for avoiding the application to public companies, e.g. as shareholders of a private company limited. • No real consistency of the overall approach and the outcome in terms of harmonization of company law, in the field (See also Eddy WYMEERSCH, Reforming the Second Company Law Directive, Financial Law Institute);

11. Differences between countries Facultative/optional provisions General remarks: -left by the EU Directives at the discretion of Member States; In the area of company law, the optional provisions become“binding only if and as long as they correspond to the firm’s needs. In addition, specific default provisions can reduce formation and operation costs for small and medium-sized firms since they provide off-the-shelf provisions that permit firms to avoid or reduce the costs of negotiating and drafting tailor – made articles of associations.” See also Optional Rather than Mandatory EU Company Law: Framework and Specific Proposals, Gerard Hertig, ETH Zurich…European Company and Financial Law Review, Vol. 3, No. 4, December 2006 ; The option fundamentally regard the enterprises, therefore it is important that the decisions, taken by the legal drafters while implementing them, to be taken in consultation with them, and only after a proper evaluation of the impact.

12. Differences between countries Second Council Directive 77/91/EEC of 13 December 1976 (The Second Company Law Directive) as regards the formation of public limited liability companies and the maintenance and alteration of their capital, as amended by the Directive 2006/68/EC; The amendments derive from the recommendations of Final Report of the High Level Group of Company Law Experts on a Modern Regulatory Framework for Company Law in Europe to simplify and modernize the Second Company Law Directive, for the purpose of improving the efficiency and competitiveness of business, while maintaining the rigorous protection of shareholders and creditors. The Directive 2006/68/EC reduces some obligation of information (IO) requiring the business to provide information and data to the public sector or third parties.

13. Differences between countries “Drafting an expert report when shares are issued for considerations other than in cash if subscribed capital is increased” was considered to be a removable IO (under specific circumstances) able to produce unnecessary administrative burdens for business. Another example of options consists in the fact that the directive prohibits shares to be issued at a price lower than their nominal value, or, where there is no nominal value, their accountable par (See article 8, 1). However, in order to facilitate the use of intermediaries, the directive offers the option of allowing those who undertake to place shares in the exercise of their profession to pay less than the total price of the shares for which they subscribe in the course of this transaction (the same article paragraph 2).

14. Differences between countries TABEL OF CORRESPONDANCE

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