The new European company law

Company law is undergoing fundamental change in Europe. All European countries have undertaken extensive reform of their company legislation. Domestic company law reform has traditionally been driven by initiatives to remedy weaknesses that have come to light in larger corporate failures or scandals. Initiatives to make corporate governance more effective is one such feature of recent European company law reform. In parallel, company law reform has been taken in the opposite direction by the wish to simplify and lessen the burdens in particular on smaller and medium-sized businesses (SMEs). The new Member States have gone through even more fundamental reform to facilitate a modern market economy and then to implement the acquis communautaire in company law. The prospect of regulatory competition increasing the number of domestic businesses incorporating abroad, has increased the pressure to reduce capital requirements.

The case law of the European Court of Justice on the right of establishment and to provide services and the free movement of capital, has in recent years been brought to bear on national company law and corporate practice. National company law has been set aside as restricting the free movement of companies or restricting the exercise of the fundamental freedoms in other ways. As European Union law gradually opens up the choice of country of incorporation for businesses in Europe, the competition between national company laws is increasing.