There has been an exponential growth in interest in comparative company law in recent years. For example, in the period from 2002 to 2011, no fewer than ten monographs or edited collections were published exploring this new field of enquiry. The burgeoning literature was mirrored by an increase in University Postgraduate courses or programs in comparative company law and corporate governance. Moreover, the dissolution of trade barriers and mass cross-border capital flows engendered by the forces of competition and globalization have necessitated legal practitioners to be conversant with the company laws of jurisdictions other than their own.

In Mathias Siems and David Cabrelli (eds.), Comparative Company Law: A Case Based Approach, Hart Publishing, 2013 (publisher’s website; introduction on SSRN) we have aimed to fill an important gap in this field. Existing books on comparative company law tend to focus on the institutional structure of the corporation but this approach risks overlooking specific cases and how the issues arising from disputes are resolved in different jurisdictions. For example, topics related to directors’ liability, creditor protection and shareholders’ rights may best be understood by analyzing how selected hypothetical cases would be solved in different countries.

…continue reading: Comparative Company Law: Case Based Approach

Takeovers remain the most controversial corporate governance mechanism. According to pro-takeover commentators, takeovers are generally beneficial for corporate governance. Takeovers can displace poorly performing managers and facilitate corporate restructuring. From this perspective, regulation should encourage takeovers. On the opposite side of the debate, those who oppose hostile takeovers argue that they can disrupt well-functioning companies and encourage short-termism. From this point of view, policies that hamper takeovers are favored.

In our paper The Case for an Unbiased Takeover Law (with an Application to the European Union), we reject a categorical pro- or anti-takeover position. While hostile and friendly takeovers may be efficient in the aggregate, individual takeovers and individual companies’ exposure thereto are efficient or inefficient depending on a variety of factors. These factors include the production functions of companies, the conditions in the relevant industry, the problems confronting the corporation and the best response to those problems. Because these all may differ from company to company and over time, so also may the appropriate stance to takeovers differ. Consequently, we posit that takeover regulation should sanction the efforts by individual companies to devise a takeover regime appropriate to their own, mutable circumstances. In other words, takeover regulation should be limited to a set of optional rules.

…continue reading: The Case for an Unbiased Takeover Law

Almost half a decade after the onset of the financial crisis, populist sentiment and the resulting political environment continue to fuel stricter regulation of executive and director compensation, with the latest wave in Europe including substantive restrictions on compensation in the financial services industry and “say-on-pay” initiatives (i.e., initiatives providing for shareholder approval of compensation). This post describes these recent European compensation developments, namely:

• The so-called “banker bonus cap” – substantive limits on the amount of variable compensation that can be paid to certain employees at financial institutions; and
• Say-on-pay developments in the E.U. and Switzerland.

…continue reading: European Compensation Developments: Financial Institutions and Beyond

Is there a competition for corporate charters in Europe? Corporate and comparative scholars have been discussing the similarities between the Delaware-led competition in the United States with the slowly emerging market for corporate legal forms in the European Union.

In my recent paper, Corporate Mobility in the European Union – a Flash in the Pan? An empirical study on the success of lawmaking and regulatory competition, recently made available on SSRN, I provide new empirical evidence on the development of the market for incorporations in Europe, and on the impact of national law reforms.

Since the seminal Centros case in 1999, European entrepreneurs have been allowed to select foreign legal forms to govern their affairs. While much academic effort has been spent to evaluate the early market reactions to this case-law, effectively opening up the European market, relatively little attention has been devoted to subsequent developments. This is surprising, since the various national lawmakers’ responses to the wave of entrepreneurial migration offer a rare glimpse on the effects of regulatory competition and subsequent business’ reaction, as well as on the relevance and effects of lawmaking and regulatory responses to market pressure.

…continue reading: Corporate Mobility and Regulatory Competition in Europe

Some 5 ½ years out from the Autumn 2008 Lehman Brothers collapse, the massive effort by the world’s leading economies to reset the regulation of the financial system is now entering its final stages. The momentum for reform remains strong, particularly with respect to shadow banking. But the main elements of the 2008-2009 G20 regulatory agenda are now in place. In the EU, for example, recent weeks have seen agreement on the Capital Requirements Directive IV, which implements the Basel III agreement and is one of the final elements of the EU’s crisis-era reform programme. Internationally, the regulatory perimeter has extended significantly, new regulatory tools and styles have been developed, and institutional structures have been reformed and replaced. The critical implementation phase is now well underway; the new EU regime has rapidly been intensified by a host of implementing rules; the behemoth US Dodd Frank Act is being subject to similar intensification. The review process is already gathering stream; the EU’s crisis-era short selling regime and its new institutional structure for financial system supervision are both to be reviewed over 2013. It is time to take stock.

In our new book, The Regulatory Aftermath of the Global Financial Crisis we (Eilís Ferran, Niamh Moloney, Jennifer Hill, and John C. Coffee Jr.) examine the forces which have shaped the international regulatory reform process and consider the likely legacy effects of the crisis-era. The book adopts a comparative approach. It examines in detail how the EU and the US – two major world economies heavily affected by the financial crisis – responded to the crisis. But it also considers the Australian experience and probes why the Australian regulatory system and economy proved resilient over the financial crisis and the reforms which it has, nonetheless, experienced. Comparison of these three major economies and how they performed over a period of extreme stress tells us much about the complex regulatory, political and economic ecosystems of which financial markets are a part.

…continue reading: The Regulatory Aftermath of the Global Financial Crisis

Last week, the European Commission announced proposed amendments to the notification forms that companies must complete to report mergers subject to antitrust review in the EU, with the stated intention of reducing burdens on filing parties. If adopted, the proposed changes would reduce the amount of information parties must provide in transactions that are unlikely to raise competitive concerns.

The EC proposes to expand the categories of mergers that are eligible for review under a simplified procedure that allows companies to file “short form” notifications with more limited information requirements. Under the proposed changes, the simplified procedure would apply to all mergers that result in the combined firm holding a market share of less than 20% in any market in which both parties are active, up from the current threshold of 15%. In addition, at the EC’s discretion, filing parties would be permitted to use the “short form” when a merger results in a small market share increase, even if the combined firm’s market share exceeds 20%. For vertical mergers, the market share threshold for the simplified procedure would increase from 25% to 30%. The EC estimates that, as a result of these changes, an additional 10% of all reportable mergers could be reviewed under the simplified procedure, with significant benefits—in terms of both time and costs—for companies no longer required to complete the full notification.

…continue reading: European Commission Proposes Amendments to Premerger Notification Regime

Euro Area banks need credible financial backstops. The European Stability Mechanism (ESM) could contribute to the performance of this function but the direct recapitalization of Euro Area banks from this source has been made conditional upon common, high quality prudential supervision. Centralised supervision of the banking sector in the Euro Area is intended to be accomplished through the Single Supervisory Mechanism (SSM), the first step towards a future banking union.

Within the SSM, the ultimate authority and responsibility for specific supervisory tasks related to the safety and stability of all Euro Area banks will sit with the European Central Bank (ECB). This approach has been driven by pragmatism and realpolitik, rather than abstract principle: the Treaty on the Functioning of the European Union (TFEU) already caters for the possibility of the ECB conducting supervisory tasks with respect to banks, while in the post-crisis reforms central bank direct involvement in prudential supervision has come back strongly into favour. But just because it was the best option realistically available does not mean that equipping the ECB with the legal authority to act as a prudential supervisor has been a straightforward task. Any evaluation of this new system must take careful account of the boundaries of the legal space within which institutional progress was possible, and give credit for the legal ingenuity deployed. Nevertheless, compromises in certain areas and unresolved tensions in others provide reasons for unease as to the likely effectiveness of the new system.

…continue reading: The European Single Supervisory Mechanism

About a year ago, we published A New Playbook for Global Securities Litigation and Regulation, in which we detailed dramatic changes in the global securities regulatory and litigation arena driven by various factors, including not only the financial crisis of 2007-2008, but also changes in tolerance in the United States to litigation brought by foreign investors against public companies listed on non-U.S. exchanges.

One year later, the regulatory environment continues to revamp with new rules being issued constantly in the United States to conform to the legislative mandates set forth in the Dodd Frank Act. The United Kingdom and European Union also seek to reinforce previous global initiatives to reform and strengthen the Pan-European financial markets.

What is more ever-present, however, is the marked increase in global enforcement activities by regulators in the United Kingdom, Canada, and the European Union, which are attempts to give teeth to the global financial reforms each jurisdiction felt necessary to potentially prevent a “repeat” of the financial crisis. This article seeks to address the increase in global securities enforcement activity and concludes that continued cooperation and coordination in enforcement activities will be required to seamlessly address the desire to strengthen global regulatory initiatives aimed at harmonizing and centralizing international securities regulation to create safer, more fundamentally sound financial markets for investors.

…continue reading: A New Playbook Part 2 — Global Securities Enforcement Stepping Up

On 27 February 2013 the European Union (“EU”) reached a provisional deal on imposing a cap on the variable remuneration that can be paid by financial institutions in the EU. If, as expected, this provisional deal is formally approved by the EU Parliament and Council later this year, far-reaching changes will need to be implemented in the remuneration structures of many EU-headquartered banks and non-EU headquartered banks operating in the EU.

The Key Proposals

As part of negotiations on the new capital requirements under the Basel III rules, a provisional deal has been reached on proposed ratio caps on variable pay. The key proposals are: [1]

…continue reading: EU Reaches Deal on Proposed Ratio Cap on Bank Bonuses

The European Union Financial Transaction Tax (EU FTT) is back on the agenda. While only 11 EU member states will now apply the EU FTT, the effect is likely to be felt more widely.

The Directive on the EU FTT that was originally proposed in September 2011 would have covered all 27 EU member states. Following opposition from several member states, a group of 11 – Austria, Belgium, Estonia, France, Germany, Greece, Italy, Portugal, Slovakia, Slovenia and Spain (together, the FTT Zone) – have pressed on under the little-used “enhanced cooperation” procedure, whereby some EU member states can adopt a Directive that does not apply to the other member states.

The European Commission published a revised draft Directive on 14 February 2013 to implement the EU FTT in the FTT Zone. The draft Directive will require unanimous agreement between the FTT Zone states. If agreement is obtained, the EU FTT is proposed to come into force on 1 January 2014.

…continue reading: EU Financial Transaction Tax Proposed for 11 Member States