The paper employs law and finance analysis to critically discuss the quality of corporate governance and investor protection in Greece. The paper argues that the Greek corporate governance framework is fragile not only because investor protection standards are inconsistent and insufficient, but also because institutional inefficiencies undermine the effectiveness of enforcement mechanisms. The paper recognises that institutional reform should proceed in tandem with regulatory and supervisory modernisation. Nonetheless, acknowledging that the former requires significant political commitment and takes time, several proposals with a more immediate and direct effect on improving the investor protection regime are made. In particular, the paper: (a) favours the streamlining of minimum, legally binding, bright-line corporate governance norms reflecting internationally accepted standards in conjunction with a ‘comply or explain’ approach, while also considering the upgrading of corporate gatekeepers' liability – especially that of accountants and lawyers; (b) argues for the enhancement of private enforcement as a supplement to public enforcement mechanisms; and (c) supports the shifting of supervisory and enforcement attention to corporate managers' liability.

Corporation tax rates significantly influence the location of foreign direct investment (FDI) as well as company decisions on corporate borrowing, transfer pricing, dividend and royalty payments, and research and development. While direct taxation remains within the competence of individual EU Member States, the European Court of Justice (ECJ) has faced an increasing number of corporation tax-related cases over recent years and its judgments have significantly redrawn the European tax landscape. The present paper reviews and synthesises these ECJ decisions and analyses their implications for the FDI decisions of multinational corporations.

The European Commission's Recommendation of 2008 on auditor liability relies heavily on the assumption that auditors are over-deterred. The economic rationale that underpins this assumption is entirely focused on liability towards investors and the US narrative concerning securities class actions. This approach oversimplifies the issue, because it does not consider why auditors really exist and what the different interests served by them are. Accordingly, it neglects that auditors' liability is multidimensional. This article analyses auditor liability's multi-layered regimes. It investigates who the auditor's principals are; whether the auditor and those principals are in a position to negotiate in order to design the optimal liability regime; whether and at what stage market failures prevent contractual negotiation; what kind of positive (or negative) interferences stem from multiple negotiations and a multi-layered liability regime; and how such a multi-layered regime might be designed. In doing so, the article makes reference to some existent legal regimes and comments on them. However, its analysis is functional, not comparative. The article argues that the auditor liability case is much more complex than the economic and the law & economics literatures suggest, and concludes that a generalised, uniform, worldwide approach in favour of liability reduction has no scientific grounds, at least at the current stage of our knowledge.

This paper deals with the effects that intermediation has on strategic behaviour in negotiations. To this end, we use the tools of game theory to analyse how different institutional settings can provide specific strategic incentives and thereby condition the outcome of negotiations. We concentrate on some very recent contributions, which have addressed gaps in this literature and stress the economic intuition behind some predicted behaviours.

EC Recommendation 2008/473/EC of 5 June 2008 concerning the limitation of the civil liability of statutory auditors and audit firms presented three methods for limiting auditor liability: (1) the establishment of maximum financial amounts of compensation (liability caps); (2) adoption of proportionate liability; and (3) limitation of liability by agreement between the auditor and his client. The Recommendation was based on several arguments according to which the limitation of liability would be necessary to guarantee the sustainability of the audit profession given the enormous threats posed by civil litigation against auditors, especially against the member firms of the biggest international networks.

The paper starts with an analysis of the arguments presented by the European Commission for issuing the Recommendation. Each of the proposals made is also discussed separately. This preliminary approach serves as a platform for the treatment of issues not considered during the groundwork for the Recommendation, such as the risks of ‘veil piercing’, that threaten the shielding structure of international audit networks and the impact of the recent financial crisis. As regards the latter, the paper carries out an assessment between the increasing risks of the crisis-related lawsuits for the audit profession and the need to strengthen investor confidence in auditors' work. Moreover, it includes a discussion of recent developments in EU audit policy as a result of the crisis and particularly of the findings (e.g., Valukas Report) that arose from some of the major bankruptcies occurring in the US and in Europe.

The results of the analysis of the first arguments used by the EC together with the impact of the crisis lead to a conclusion regarding the need for an updated interpretation of the 2008 Recommendation.

The Paper deals with the incentive structures for directors in the vicinity of insolvency. Distinctions between closely held and public corporations are discussed as well as the application of business judgement rules to decisions of directors in the vicinity of insolvency, in particular with regard to the solvency test. Finally stress is laid on procedural issues such as enforcement of director's liability without formal insolvency procedures.

The paper deals with the issue of the compatibility of the Act on Special Powers of the Treasury and Their Exercise in Companies of Special Importance for Public Order or Public Security with the freedom of capital movements in the context of ECJ jurisprudence. The first part of the paper analyses the concept of the freedom of capital movements, as well as the concept of the golden share as a restriction on this freedom, on the basis of individual ECJ judgments. The next part covers legal solutions adopted in the Polish Act, namely its subjective scope, the rights of the Minister of Treasury in companies in which the State Treasury is entitled to a golden share, the nature of these rights, and the institution of Treasury observers. The final part of the paper examines the compatibility of the golden shares model adopted by the Polish legislator with ECJ jurisprudence. In particular, the authors seek to predict what the ECJ would hold if the European Commission were to bring an infringement case against Poland. This analysis deals with the following issues: the Polish Act as a restriction on the freedom of capital movements, the possible justifications of this restriction and the proportionality of the golden shares model adopted by Poland. As their final conclusion, the authors express the view that the Polish provisions governing the State Treasury's golden shares in principle conform with the ECJ's guidelines, although some features of the Polish golden share system can be questioned.

Even though the GmbH is an established legal entity that has remained (largely) unchanged for over a century, recent abuses and the pressure of foreign competition has caused the German government to propose significant changes. While not opting for a fundamental and groundbreaking reform, it has put forward a number of smaller modifications that will change the face of the GmbH.

This article analyses, from a comparative law and economics perspective, the regulatory regimes for the stabilisation of share prices during IPOs in the United States and the European Union. Pure stabilisation, which is the principal form of stabilisation forms the focus of this study. With respect to ancillary stabilisation, i.e., the overallotment facility and greenshoe option, Germany and Italy are taken as examples for describing the concrete functioning of the discipline in Europe as compared to the United States. First, the article argues that the economic rationality of pure stabilisation may cast doubt on its effective use because of its high potential costs. Furthermore, a credible commitment problem of the syndicate's intervention may lead to a possible discrepancy between the ratio legis of the prospectus disclosure discipline and the ratio legis of the pure stabilisation activity. Second, the article shows that the judgement on the proper working of ancillary stabilisation crucially depends on the binding or non-binding character of investors' adhesions with respect to the final price setting, i.e., on something that is regulated by European law and national contract law.

The European Commission's proposal to establish shareholder democracy and mandate the one-share-one-vote (1S1V) rule has drawn much attention and controversy. In the pursuit of a popular appeal for the rule, European Commission policymakers have tried to turn equiproportional representation into something close to an aphorism tied to corporate egalitarian sentiments underscoring justice, fairness and ethics.

Based on law, finance and economics literature, this paper evaluates the economic underpinnings and efficiency of 1S1V and concludes that it is generally a suboptimal corporate voting mechanism compromising economic efficiency and distorting incentives of corporate constituencies. Moreover, it is submitted that any attempt to mandate 1S1V in the European Union may induce companies to move either to pyramidal structures or, worse yet, to use complex derivative instruments to decompose 1S1V. While pyramidal holdings may further facilitate expropriation of private benefits of control as compared to the status quo, the decomposition of 1S1V can: (i) further advance heterogeneity of preferences of shareholders; (ii) create incentives for negative voting arbitrage; and (iii) encourage the approval of value-reducing transactions or, worse yet, become a takeover defence. Hence, even if the European Commission can hypothetically move corporate Europe from controlled ownership structures to minority ownership ones, 1S1V is clearly worse than the status quo, and, paradoxically, instead of advancing the rights of ‘disadvantaged shareholders’, 1S1V can further demote shareholder rights in the European Union.

This article proposes that European Commission policymakers should refrain from taking any measure at the level of the Community and should instead strengthen disclosure rules and the enforcement thereof. Furthermore, some standards of review governing significant conflict of interest transactions can be introduced. It is also submitted that European Commission policymakers can provide opt-in and opt-out provisions for the Member States. Such menus should be once again complemented by rigorous disclosure rules and enforcement mechanisms.

The paper gives an account of the proceedings and resolutions of the 67th German Jurists Forum in Erfurt in September 2008 and analyses their significance within the broader context of German company law and other current reform proposals.

The first part of the paper is devoted to the fundamental policy question that was the main topic of the 67th German Jurists Forum: are specific legal provisions for listed and non-listed companies advisable? After sketching the historical background and the status quo of German law, the paper briefly outlines the reform concept presented by Professor Bayer in his expert report and then summarises the gist of the debates and resolutions on this issue.

The second part of the paper focuses on the vast range of other topical issues discussed during the debates, most notably the intense discussion on the reform of the legal regime governing shareholder suits in order to tackle the persisting problem of ‘marauding shareholders’ [‘räuberische Aktionäre’]. Other prominent issues included the calculation of compensation payments to shareholders, the proposal to give German stock corporations the freedom to choose between a one-tier and a two-tier system of management, and various proposals to provide more flexibility for non-listed companies.

The paper concludes that although the German Jurists Forum in general took a rather conservative stance, it also made powerful and well-reasoned reform recommendations with respect to the important issues of compensation payments and the legal regime regarding shareholder suits.

Competitive pressure from an increasingly internationalised market for exchange services forces market participants as well as regulators to adapt and modernise. Thus it comes as no surprise that in Germany too, as elsewhere, ownership, governance and regulation of exchanges have changed rapidly within a surprisingly short period of time over the last few years. Further reforms are already being discussed. However, some structural and regulatory features are surprisingly resistant to change. What we see can therefore be labelled as distinctly ‘path dependent’ progress resulting in a somewhat unfinished agenda.

This paper analyzes the emergence and practice of company groups as well as other legal institutions aimed at protecting creditors and minority shareholders of controlled companies in Polish law. To avoid misunderstandings, the concept of groups of companies is defined as an association of two or more companies dominated by a single entity (dominant firm). In principle, it is assumed that such groups of companies consist of companies possessing independent legal personality. However, participation of other legal entities in the group should also be considered. In particular, the classical narrow definition of a group of companies, if adopted by a given statute for the purpose of protecting creditors or minority shareholders, makes the task of circumventing the law rather easy. Thus, it should be sufficient if a group is dominated by a partnership or a cooperative organization. For similar reasons, a requirement that a “group” shall consist of at least three companies seems to be too formalistic and imperfect. Hence, the definition of a “group” or “dominance” may be given different meanings for various purposes. In this paper the notion of “dominance” is patterned after the seventh EU Directive, unless defined otherwise.

Fraudulent transfer law in the United States provides a safety net for corporate creditors. It prohibits insolvent debtors from making transfers or incurring obligations for less than reasonably equivalent value. Moreover, it reaches any transaction that lacks economic substance and that is designed merely to make it hard for creditors to monitor the debtor. The distinctive shape of fraudulent transfer law in the United States is not replicated in the other common law or in civil law jurisdictions. Nevertheless, the functions it performs are likely to be part of any legal regime that protects the rights of creditors and other investors.

This article looks at the ongoing dispute between the American brewer Anheuser-Busch and the Czech beer producer Budejovický Budvar over the right to use the name Budweiser or Bud on their products. Currently, both of the brewers produce a beer labelled ‘Budweiser’. The fight concerns one of the most controversial issues of intellectual property protection: the co-existence of trademarks and geographical indications. The case under review, Case C-216/01 Budejovický Budvar v. Rudolf Ammersin GmbH, Judgment of 18 November 2003, is only one episode in this ongoing dispute. This article explains why the decision of the Court of Justice does not answer the question whether co-existence of these particular classes of names or more generally of geographical indications and trademarks is possible. An overview of other international disputes in relation to the same issue is also provided in this article.

An integrated financial market raises the fundamental question of how enterprises should organise themselves in order to succeed in the competition for international capital. There is strong evidence that, in the future, corporate governance, including the possibility of exercising active ownership, will be a parameter in the competitive market for capital.

This paper evaluates the primary legal and financial mechanisms that help support the development of a venture capital market. Specifically, we argue that emulating the organization and contractual pattern of the US venture capital market could enhance the development of the European venture capital market. We first show that the modernization of the ‘venerable’ limited partnership form, based on US experiences, offers substantial contracting benefits for investors and is crucial to the operation of a mature venture capital market. We then argue that the emergence of more efficient limited partnership structures can emerge from jurisdictional competition between European states. We argue that the United Kingdom, which has recently embarked on general and limited partnership law reform, could, in light of the competitive lawmaking environment that the ECJ has opened up, be in the best position to enter the competition within the EU. It then explores the prominent features of the UK special Limited Partnership statute, which makes it possible for venture capitalists to organize their contractual relations that are best suited to the characteristics of the venture capital market. Finally, our analysis provides an understanding of the competitive forces that shape legal change, which has implications for the ongoing debate in Europe over the reform of limited partnership law and related business forms.

This article deals with the exclusion of non-profit-making entities from the right of freedom of establishment of Articles 49 and 54 TFEU. It analyses the historical reasons for this exclusion. It is argued that the exclusion from freedom of establishment is no longer justified on the basis of two elements. Firstly, the development of the jurisprudence of the European Court of Justice in the fields of competition law, free movement of capital and tax law makes such exclusion systematically no longer tenable. Secondly, a law and economics treatment of non-profit firms as organisations that efficiently provide services in alternative to for-profit firms weakens the reasons for the exclusion. The article proposes a uniform, European notion of non-profit entity based on a law and economics analysis of this type of firm for the purposes of Article 54 TFEU as opposed to possible different national notions. This is followed by a brief analysis of the hypothesis of regulatory competition among jurisdictions for the law regulating the corporate governance of non-profit entities.