Europe: the harmonisation of insolvency law

INSOL Europe recently published a report titled Harmonisation of Insolvency Law at EU Law Level: see here (pdf). The report outlines differences between national insolvency laws which create difficulties for companies having cross-border activities or ownership within the EU and identifies areas where harmonisation would be desirable. The report also considers the extent to which the harmonisation of insolvency law could facilitate further harmonisation of company law.

The report contains surveys of the insolvency regimes in the UK, Poland, France, Germany, Spain, Italy and Sweden. References are also made to the law in Belgium and the Netherlands.

Europe: freedom of establishment and the 'life and death' of companies

Yesterday, Advocate General Poiares Maduro gave his opinion in Cartesio Oktató és Szolgáltató Bt. (Case C-210/06). The case concerned a limited partnership (Cartesio) which wanted to move its headquarters from Hungary to Italy. Hungarian law prevented Cartesio transferring its headquarters to another Member State whilst retaining its status as a partnership governed by Hungarian law. The only way for Cartesio to transfer its operational headquarters was by dissolving its business in Hungary and reestablishing in Italy. Does this amount to a restriction on freedom of establishment under Articles 43 and 48 of the EC Treaty?

The Advocate General held that the Hungarian legislation, which applied to partnerships and companies, breached Articles 43 and 48 of the EC Treaty. Articles 43 and 48, in his opinion, precluded rules which make it impossible for a company or partnership formed under the national law of a Member State to transfer its operational headquarters to another Member State. In this regard, and after considering recent case law of the Court, the Advocate General observed:

... it is impossible, in my view, to argue on the basis of the current state of Community law that Member States enjoy an absolute freedom to determine the ‘life and death’ of companies constituted under their domestic law, irrespective of the consequences for the freedom of establishment. Otherwise, Member States would have carte blanche to impose a ‘death sentence’ on a company constituted under its laws just because it had decided to exercise the freedom of establishment".

The Advocate General nevertheless recognised that restrictions of the kind in the Hungarian law could be justified on grounds of general public interest including the prevention of fraudulent conduct or the protection of the interests of creditors, minority shareholders, employees or the tax authorities. The Hungarian law did not, however, contain any grounds of justification.

NB:

[1] The Advocate General's opinion is not binding on the Court but in the majority of cases such opinions are followed.

[2] In 2004 the European Commission consulted on a proposed Directive (the 14th Company Law Directive) on the right of limited companies to transfer their registered office from one Member State to another. However, in December 2007 the Internal Market Commissioner Charlie McCreevy decided that legislative action was not required (see here). In the impact assessment it was explained why:

Since the practical effect of the existing legislation on cross-border mobility (i.e. the cross-border merger directive) is not yet known and that the issue of the transfer of the registered office might be clarified by the Court of Justice in the near future, the assessment concludes that it might be more appropriate to wait until the impacts of those developments can be fully assessed and the need and scope for any EU action better defined"

EU: Member States' failure to implement company law Directives

The European Commission has sent reasoned opinions (about which see here) to several countries - including Hungary, the Netherlands and Poland - concerning their failure to implement Directive 2004/109/EC on the transparency obligations of listed companies. The Commission is also bringing a case before the European Court of Justice against Italy with regard to the latter's failure to implement in full Directive 2003/58/EC on company disclosure requirements.

Further information about the above is available here and for information concerning European company law, see here. For the current position on Member States' implementation of company law directives, see here.

Italy: Minority shareholder protection

Earlier this month, the Financial Times published an article by Luigi Zingales which considered recent changes in Italian law concerning the appointment of directors to public company boards. Zingales observed:

"To protect minority shareholders, a 2005 law made it mandatory for all publicly traded companies to reserve some board seats for lists not related to the controlling shareholder. This is a stronger version of a Securities and Exchange Commission proposal that would require US companies to include shareholder-nominated candidates for the board in the proxy voting material (so-called shareholders' access to proxy). Opponents of this reform in the US have argued that such access will transform corporate boards into small parliaments, where majority and minority will fight to the detriment of companies. The Italian experiment provides a powerful test of this conjecture. Given the legendary passion of Italians for politicking, if there were any merit to this concern, we would certainly see it in spades in Italian boards. While it is too early to draw a definite conclusion, the evidence so far is very encouraging. From the outside there seems to be no sign of politicking. Furthermore, my personal inside experience, as an appointee of minority shareholders on the Telecom Italia board, confirms this impression. We have had disagreements, but these were not ideological conflicts between majority and minority".

[Click here and here for an overview (in English) of the legislative changes].

Italy: Corporate Governance Code amended

Borsa Italiana, the Italian Stock Exchange, has announced several amendments to its corporate governance code. See here for further information. A copy of the revised code will be available here (English) and here (Italian).