This issue of the European Business Organization Law Review is devoted to the most topical and important areas of company law reform, namely the revision of corporate forms and the introduction of unincorporated business entities such as partnerships and hybrid business forms.

Lower barriers of entry for new firms and more flexibility in structuring a business organisation are the two key factors motivating the introduction of the new company law. In general, policymakers use new company law initiatives to encourage entrepreneurship, innovation and cooperative arrangements. This paper distinguishes the diverse strands of company law reforms arising in the United States, Europe and Asia and points to the underlying conditions that shape the markedly different reform outputs. Our analysis points to three important factors – (1) private ordering; (2) fiscal transparency; and (3) limited liability – that effect the incentives for new firm creation. However, we find that many of the new company law reforms are incomplete. Nevertheless, these new company law reforms retain the ability to generate rents due to their adaptability and responsiveness to social and economic change.

The many legal forms for business organisations that first appeared in the United States during the last thirty years – the limited liability company (LLC), the limited liability partnership (LLP), the limited liability limited partnership (LLLP) and the statutory business trust – all combine the pattern of creditors' rights, or asset partitioning, that is traditional to the business organisation with the freedom of contract among investors and managers that is traditional to the partnership. To view these new entities as partnership-like is to treat the degree of freedom of contract as the essential difference between the traditional corporation and partnership forms; to view them as corporation-like is to treat the pattern of creditors' rights as the essential difference. While recent scholarship often takes the former view, the latter seems more accurate. History shows that much of the contractual inflexibility in the traditional corporation served merely to buttress its pattern of creditors' rights and that this inflexibility fell away upon the development of substitute sources of investor protection. The new forms are thus better understood as part of the continuing development of the corporate form rather than as entities more akin to the traditional partnership, which has in fact been evolving in a different direction. This article first develops this argument in terms of the trade-off between contractual freedom and the form of asset partitioning that to date has received the most scholarly attention, that is, limited liability. It then explores the evolution of the new forms from a less familiar perspective, focusing on the entity shielding component of asset partitioning.

Starting from the suggestion that external costs are created by the plenary private order regime – in short, that ‘private ordering’ is not truly private – the author advocates restrictions based on social welfare, and not traditional fairness, concerns when crafting limits on the extent to which participants in business firms can reorder their relations inter se from the statutorily defined relationship. A constructive start to this discussion would be to acknowledge that private ordering generates costs, some of which are social. Having done so, we could agree that an aggregate net social calculation of value and cost is appropriate to see if plenary private ordering is justified and, if not, to determine the appropriate level of private ordering. This policy discussion provides a valuable reminder of the value of commonality in these matters. Jurisdictions benefit when we adopt common modes of analysis, shared nomenclature and harmonisation statutes. That value of commonality has been too often put aside as we are guided by market-oriented generalisations which focus too heavily on the presumed benefits to individual participants and firms and ignore the social dimensions of public policy formation.

A reform of the GmbH is underway. The appearance of branches of British private limited companies in Germany in the aftermath of the Inspire Art judgment had a certain impact on the reform discussion. Which strategy should be chosen? The so-called MoMiG reform has decided: Let's face the competition. The reform aims to make the incorporation of a GmbH much quicker, easier and cheaper. It seeks to deregulate some of the complications in German law such as contributions in kind, capital maintenance and cash pooling and rules on shareholder loans that are difficult to understand. It will also reduce minimum capital requirements. Furthermore, the intended strategy is to modernise the company law we have and not to introduce even more and new forms of companies into our law. The MoMiG Act should reach Parliament in spring 2007 and will hopefully enter into force at the beginning of 2008.

The GmbH & Co. KG is the most common ‘hybrid’ type of company in Austria. It consists of a limited partnership (KG) owning the company assets and a private company limited by shares (GmbH) participating as the KG's (usually only) general partner. Typically, the shareholders of the GmbH and the limited partners of the KG are identical, in most cases also holding shares in the same proportion. Contrary to most other forms of business organisation, the GmbH & Co. KG is not a legislative product but has arisen out of practical needs. The main purpose of setting up a GmbH & Co. KG is to combine fiscal advantages of partnerships (i.e., netting the company's profits and losses against the shareholders' other income) with limited liability. Although this hybrid was recognised very early by the courts, the discussion about its legitimacy is still alive. As soon as the tax advantages disappear in comparison to other legal forms, the attractiveness of the GmbH & Co. decreases. A legislator should hesitate to establish a hybrid only to facilitate fiscal benefits; he must prove and secure advantages by civil and corporate law.

All over Europe, we see drastic changes being made to simplify company law and make it more flexible. A fundamental principle of this reform movement is the freedom of shareholders to determine internal structure and power balance. At the same time, as a consequence thereof, we may see more situations in which minority shareholders at some point may feel trapped. More freedom and flexibility will therefore need to be supplemented with a credible and efficient level of minority protection. Until now, the general approach in Europe (but also to a certain extent in the United States) is that shareholders only have a right to exit through a buy out if the conduct of the controlling shareholder(s) is unfair and/or oppressive. One can doubt whether this provides an acceptable level of protection in terms of efficiency and effectiveness. In this article, it will be submitted that it might be economically sound, as well as efficient, effective and satisfactory from a legal point of view, for the law to go further and award minority shareholders a right to exit the company ‘at will’ provided that (i) a reasonable notice period is observed and (ii) additional costs of financing are taken into account.

This contribution focuses on two themes: the function of private company statutes and their flexibility. It is recognised initially that private company statutes serve economic activities and purposes. In this instrumental role, they contribute to economic welfare. In addition, they have the function to serve legal certainty and to protect the justified interests of persons involved in a private company. This function is designed to promote fairness. Together these functions result in two types of rules in a private company statute: rules serving welfare, which are usually non-mandatory rules, and rules serving fairness, which are usually mandatory. The private company, as the object of these rules, has the internal characteristics of a partnership and the external characteristics of a corporate body. In addition, shareholders are financially and personally deeply involved in the private company and have no easy exit. These characteristics should be determinative for a private company statute. The author puts forward some suggestions for adjustments to the current Dutch proposal for a private company statute.

This article discusses the proposed changes to the capital maintenance regime applicable to the Dutch BV. The draft legislation introduces a liability of directors for unlawful distributions and an obligation for shareholders to repay distributions made to them in the suspect period of one year prior to the opening of bankruptcy proceedings. The current enhanced balance sheet test is replaced with a simple balance sheet test and a liquidity test. With the proposed new rules on creditor protection, the Dutch legislature aims to balance welfare and fairness: the law should not place unnecessary restrictions on company's financing decisions, but at the same time it should offer effective protection to creditors. The draft legislation has been subjected to a consultation process. The reactions to the consultation document show that it is not easy to strike the right balance between the interests of the three parties involved: the shareholders, the directors and the creditors.

This paper describes the current state of implementation of the European Commission's 2003 Action Plan on Modernising Company Law and Enhancing Corporate Governance, as well as how the new Commission revisited and adjusted the Action Plan after it entered office in November 2004. In addition, the paper sketches the outlook for the future development of European company law and corporate governance. It presents the methods and goals of the Commission and, to the extent possible, describes the contours of the concrete measures that are in the works.

After a short historical introduction, this paper argues that corporate mobility remains a real political issue. To clarify matters, it proposes to distinguish between a formal seat transfer, being the choice of a different legal regime, and a de facto seat transfer that would not affect the applicable company law, the host State not being entitled to apply its company law rules. A future directive should be based on this distinction, prescribing the formalities for the former and stating clearly the consequences of the latter, thereby also defining the limits within which the “general good” can be invoked.

In 1998, the British Government started a comprehensive review of company law due to growing concerns regarding the adequacy of the British model of the company and its governance to cope with the reality of the modern corporation and with the competitiveness of the British economy in the context of globalisation. The Company Law Review explicitly acknowledged the economic significance of company law by stating that it needed to be assessed and justified according to its effectiveness in meeting the objective of enabling the competitiveness of British companies. It is in this context that Andrew Griffiths places his analysis of the legal issues arising when a company enters into a contract or other transaction with another party. The author uses an economic analysis to determine whether these rules governing the attribution of contracts to companies are effective in meeting the main goal of company law as identified by the Company Law Review. Also, Griffiths looks at the specific proposals made by the Company Law Review that will affect the law governing contracting with companies and argues that reform has been piecemeal and that there is a case for reforming other areas as well.