Week 5

Question 1

Regulatory Competition: Lex Societatis

Answer 1

A new process (of integration) confined (mainly but no only) to private limited liability companies: an “integration” or a “converging path” throughout a regulatory competition
Indeed, the harmonization process has still left unresolved an issue that is essential in order to grant the companies a full and complete – primary as well as secondary ­– freedom of establishment and movement in EU: identification of the element of connection for identifying the lex societatis

Question 2

place of incorporation (Gründungstheorie o Incorporation Doctrine

Answer 2

Under the “incorporation principle”: the place of incorporation rule permits a business corporation to be incorporated under – and hence governed by – the law of the individual state (where the incorporation has taken place), regardless of where the firm’s principal place of business, or other assets or activities, are located

Question 3

the effective (real) seat (Sitztheorie o Real Seat Doctrine)

Answer 3

Under the “real seat doctrine”: companies are required to incorporate under the law of the state where the firm has its principal place of business

Question 4

Opposite theories

Answer 4

In a system based on the incorporation principle, corporation are free to choose the state in which they prefer to incorporate independently of where they are physically located or where they do business  In other words, they can engage in “regulatory arbitrage”
Under the “real seat” approach, since the applicable law depends on physical contacts with a specific jurisdiction, it might be impossible or inefficient, for a corporation, to choose incorporation in one jurisdiction over another

Question 5

From ‘Gebhard test’ to Regulatory Arbitrage

Answer 5

Following the ECJ pronouncements, State Members are now allowed to introduce limitations to the freedom of establishment only on an exceptional basis and concurring specific conditions (the so called “Gebhard test”):
limitations are applied on a non discriminatory basis
limitations come into effect in presence of public and general interests
limitations are appropriate and proportionate to the aim pursued
limitations must not go beyond what is necessary to obtain such objective

Question 6

Competition among Jurisdictions

Answer 6

it allows businessmen to establish a company in the State that offers the (economic and law) system they deem more convenient (market of rules)
it allows businessmen to preserve such an option even in case of subsequent transfers of seat
it allows the host State to be more attractive than others
it (theoretically) grants certainty with regards to the applicable and governing law (even if it does not grant the same with regards to the jurisdiction)

Question 7

From Defensive Competition to Convergency

Answer 7

Recent events are testifying that freedom of establishment combined with a “regulatory arbitrage” also in EU fosters a “defensive concurrence” amongst EU Member States and a subsequent “convergent path” towards principles and rules deviating from domestic traditions and cultures:
“opting-in alternative” in the by-laws and articles of associations for different internal organizational and management systems
deviation from the “one share –one vote” principle
relevance of ‘Soft Law’ process