Working paper / Johann-Wolfgang-Goethe-Universität, Institut for Law and Finance
Refine
Year of publication
Document Type
- Working Paper (141)
Has Fulltext
- yes (141)
Is part of the Bibliography
- no (141)
Keywords
- Berichtspflicht des Vorstands (1)
- Directors’ remuneration (1)
- European Takeover Directive (1)
- European law (1)
- European regulation (1)
- Feststellungsklage (1)
- Rechtsschutz der Aktionäre (1)
- UCITS (1)
- asset management (1)
- break-through rule (1)
Institute
22
This Article concerns the duty of care in American corporate law. To fully understand that duty, it is necessary to distinguish between roles, functions, standards of conduct, and standards of review. A role consists of an organized and socially recognized pattern of activity in which individuals regularly engage. In organizations, roles take the form of positions, such as the position of the director. A function consists of an activity that an actor is expected to engage in by virtue of his role or position. A standard of conduct states the way in which an actor should play a role, act in his position, or conduct his functions. A standard of review states the test that a court should apply when it reviews an actor’s conduct to determine whether to impose liability, grant injunctive relief, or determine the validity of his actions. In many or most areas of law, standards of conduct and standards of review tend to be conflated. For example, the standard of conduct that governs automobile drivers is that they should drive carefully, and the standard of review in a liability claim against a driver is whether he drove carefully. Similarly, the standard of conduct that governs an agent who engages in a transaction with his principal is that the agent must deal fairly, and the standard of review in a claim by the principal against an agent, based on such a transaction, is whether the agent dealt fairly. The conflation of standards of conduct and standards of review is so common that it is easy to overlook the fact that whether the two kinds of standards are or should be identical in any given area is a matter of prudential judgment. In a corporate world in which information was perfect, the risk of liability for assuming a given corporate role was always commensurate with the incentives for assuming the role, and institutional considerations never required deference to a corporate organ, the standards of conduct and review in corporate law might be identical. In the real world, however, these conditions seldom hold, and in American corporate law the standards of review pervasively diverge from the standards of conduct. Traditionally, the two major areas of American corporate law that involved standards of conduct and review have been the duty of care and the duty of loyalty. The duty of loyalty concerns the standards of conduct and review applicable to a director or officer who takes action, or fails to act, in a matter that does involve his own self-interest. The duty of care concerns the standards of conduct and review applicable to a director or officer who takes action, or fails to act, in a matter that does not involve his own self-interest.
113
The purpose of this essay is to assess the automatic exchange of information as described in EU Directive 2003/48 of 3 June 2003 on taxation of savings income in the form of interest payments with regard to the fundamental right of the individual to a private life, to banking secrecy and the freedoms on which the European internal market is based. The assessment reveals the conflicts of interests and values involved in the holding by banks (particularly those offering private banking services) of increasingly extensive, detailed and intimate information about their clients and in the automatic processing of that information by ever more powerful and sophisticated systems. Banking secrecy plays an essential role in protecting clients against the dangers which the disclosure of such information without their permission might produce. Banking secrecy exists not only in Luxembourg but also in many other European countries, and in Germany and France in particular it is not very different from the system applying in Luxembourg. While the French and German tax authorities do have some investigative powers not enjoyed by their Luxembourg counterparts, those powers are strictly circumscribed and cannot rely on the electronic exchange of information set out in EU Directive 2003/48/EC. While banking secrecy is totally incompatible with the electronic exchange of information, the core question is whether the latter can be reconciled with the respect for private life. In a Europe that sets itself up as the cradle of human rights, the general and en-masse exchange of private information cannot provide adequate and sufficient guarantees that the information exchanged will not be misused. The amount of interference in private life is clearly out of proportion to the public interest involved and is contrary to sub-section 2, article 8 of the European Convention for the Protection of Human Rights and Fundamental Freedoms and to articles 7 and 8 of the Charter of Fundamental Rights of the European Union. Since the automatic exchange of information at least potentially risks restricting the free flow of capital among Member States and discouraging the use of transborder banking services, its compliance with the fundamental principles of the internal market also needs to be closely examined. The restrictions imposed by such exchange very probably go beyond the limits within which the free movement of capital and services is possible. The European Court of Justice has found that there is no proportionality if the measures supposedly undertaken in the general interest are actually based on a general presumption of tax evasion or tax fraud. However, it would be true to say that the ECJ does not always examine the tax restrictions placed on the free movement of capital particularly thoroughly to ensure that they are necessary or proportionate. The economic effectiveness of the automatic exchange of information is far from being proved and involves significant cost to the banks providing the information and to the tax authorities using it. To date the system does not appear to have produced any significant new tax revenue nor does it prevent the continuing outflow of capital from Europe. Yet withholding at source, which respects individual and economic freedoms, does generate tax revenue that is cost-free to the State. Exchange of information on request in justified cases using the OECD Tax Convention on Income and Capital model does also fight tax fraud while at the same time providing citizens with the guarantees required to ensure their private lives are respected. A combination of these two systems - withholding at source and exchange of information on request in justified cases - would create the proper balance between the public and private interest that the automatic exchange of information cannot provide.
78
On 27 and 28 September 2007, a commission formed on the initiative of the authors held its first meeting in Aarhus, Denmark to deliberate on its goal of drafting a "European Model Company Law Act" (EMCLA). This project, outlined in the following pages, aims neither to force a mandatory harmonization of national company law nor to create a further, European corporate form. The goal is rather to draft model rules for a corporation that national legislatures would be free to adopt in whole or in part. Thus, the project is thought as an alternative and supplement to the existing EU instruments for the convergence of company law. The present EU instruments, their prerequisites and limits will be discussed in more detail in Part II, below. Part III will examine the US experience with such "model acts" in the area of company law. Part IV will then conclude by discussing several topics concerning the content of an EMCLA, introducing the members of the EMCLA Working Group, and explaining the Group's preliminary working plan.
84
After the pioneering German “Aktiengesetz” of 1965 and the Brazilian “Lei das Sociedades Anónimas” of 1976, Portugal has become the third country in the world to enact a specific regulation on groups of companies. The Code of Commercial Companies (“Código das Sociedades Comerciais”, abbreviately hereinafter CSC), enacted in 1986, contains a unitary set of rules regulating the relationships between companies, in general, and the groups of companies, in particular (arts. 481° to 508°-E CSC). With this set of rules, the Portuguese legislator has dealt with one of the major topics of modern Company Law. While this branch of law is traditionally conceived as the law of the individual company, modern economic reality is characterized by the massive emergence of large-scale enterprise networks, where parts of a whole business are allocated and insulated in several legally independent companies submitted to an unified economic direction. As Tom HADDEN put it: “Company lawyers still write and talk as if the single independent company, with its shareholders, directors and employees, was the norm. In reality, the individual company ceased to be the most significant form of organization in the 1920s and 1930s. The commercial world is now dominated both nationally and internationally by complex groups of companies”. This trend, which is now observable in any of the largest economies in the world, holds also true for small markets such as Portugal. Although Portuguese economy is still dominated by small and medium-sized enterprises, the organizational structure of the group has always been extremely common. During the 70s, it was estimated that the seven largest groups of companies owned about 50% of the equity capital of all domestic enterprises and were alone responsible for 3/4 of the internal national product. Such a trend has continued and even highlighted in the next decades, surviving to different political and economic scenarios: during the 80s, due to the process of state nationalization of these groups, an enormous public group with more than one thousand controlled companies has been created (“IPE - Instituto de Participações do Estado”); and during the 90s until today, thanks to the reprivatisation movement and the opening of our national market, we assisted to the re-emergence of some large private groups, composed of several hundred subsidiaries each, some of which are listed in foreign stock exchange markets (e.g., in the banking sector, “BCP – Banco Comercial Português”, in the industrial area, “SONAE”, and in the media and communication area, “Portugal-Telecom”).
42
43
The paper examines challenges in effectively implementing the lender-of-last-resort function in the EU single financial market. Briefly highlighted are features of the EU financial landscape that could increase EU systemic financial risk. Briefly described are the complexities of the EU’s financial-stability architecture for preventing and resolving financial problems, including lender-of-last-resort operations. The paper examines how the lender-of-last-resort function might materialize during a systemic financial disturbance affecting more than one EU Member State. The paper identifies challenges and possible ways of enhancing the effectiveness of the existing architecture.
87
The market reaction to legal shocks and their antidotes : lessons from the sovereign debt market
(2008)
This Article examines the market reaction to a series of legal events concerning the judicial interpretation of the pari passu clause in sovereign debt instruments. More generally, the Article provides insights into the reactions of investors (predominantly financial institutions), issuers (sovereigns), and those who draft bond covenants (lawyers), to unanticipated changes in the judicial interpretation of certain covenant terms.
110
After the introduction of the euro in 1999, the debate on the financial stability architecture in the EU focused on the adequacy of a decentralised setting based on national responsibilities for preventing and managing crises. The Financial Services Action Plan in 1999 and the introduction of the Lamfalussy process for financial regulation and supervision in 2001 enhanced the decentralised arrangements by increasing significantly the level of legal harmonisation and supervisory cooperation. In addition, authorities adopted EU-wide MoUs to safeguard cross-border financial stability. In this context, the financial crisis has proved to be a major challenge to the ongoing process of European financial integration. In particular, momentous events such as the freezing of interbank markets, the loss of confidence in financial institutions, runs on banks and difficulties affecting cross-border financial groups, questioned the ability of the EU financial stability architecture to contain threats to the integrated single financial market. In particular, the crisis has demonstrated the importance of coupling to micro-prudential supervision a macro dimension aimed at a broad and effective monitoring and assessment of the potential risks covering all components of the financial system. In Europe, following the de Larosière Report, the European Commission has put forward proposals for establishing a European System of Financial Supervision and a European Systemic Risk Board, the latter body to be set up under the auspices of the ECB. While the details for the implementation of these structures still need to be spelt out, they should reinforce significantly – ten years after the introduction of the euro – the financial stability architecture at the EU level.