In this article, the authors fill a gap in the legal literature surrounding post-Enron corporate governance reform by focusing on the need for enhanced shareholder voice in the auditing process. The authors expand on Anand's analysis in ‘Shareholder Isolation and the Regulation of Auditors’ with transatlantic perspectives on reform of the audit process. Specifically, they examine the role of the auditor, shareholder powerlessness and the post-Enron reform process in Canada and the UK, contrasting the reform movement in these countries with that in the US. Finally, the authors examine the developing auditor governance regime in the EU. In their analysis, the authors reach several important conclusions: the auditor-shareholder relationship and the duties of auditors to shareholders need to be clearly defined; shareholder isolation from the audit process severely endangers investor confidence; the independence of audit committees and auditors is not enough to protect shareholders; and, most importantly, shareholder voice should be recognised as an essential tool for promoting not only auditor independence, but also, ultimately, investor confidence. In short, the authors conclude that shareholder voice must be a part of the post-Enron reform of the audit process.

Legislators have been using audit and financial crises as excuses to introduce additional regulation into an industry that is already over-regulated. This practice is questioned here because of the ability of the free market to punish audit failures, the dynamism shown by participants in relation to the voluntary adoption of new self-regulatory policies and the high costs and dubious effectiveness of the new regulations adopted. A more prudent approach that would give the market time to discover the efficient mix of services, quality safeguards and firm structures is advised. Current regulatory tendencies, the main element of which is mandatory auditing, risk condemning financial auditing to triviality and increasingly ineffective regulation.

This article argues that in analysing the efficiency of the German legal capital rules, it is helpful to distinguish carefully between three different aspects: the question of whether the law should impose a minimum legal capital requirement, the relevance of provisions in the articles of incorporation pertaining to the legal capital of the company as a collective offer to the company's creditors, and the role of legal capital rules in limiting distributions prior to the company's insolvency. The existence of a minimum legal capital requirement, while it may not be particularly burdensome to serious-minded entrepreneurs, does not do much to help creditors. The second aspect, namely, the role of provisions in the articles of incorporation pertaining to the legal capital of the company as a collective offer to the company's creditors, is far more important. It explains why the traditional system of capital protection constitutes an efficient contractual instrument facilitating the entrepreneurial activities of companies. Most importantly, however, legal capital rules are the most efficient way of limiting distributions prior to the company's insolvency, providing less room for manipulation than the ad hoc solvency tests used in Anglo-American legal systems.

This volume arose out of an October 2003 Conference on Corporate Reorganizations and Bankruptcy organized by the Faculty of Law and Center for Company Law at Tilburg University. The principal focus of the issue is corporate governance and bankruptcy reform, but also highlights the European Company (SE) and the theory and practice of cross-border reorganizations and inter-state competition in corporate structures. The special issue has four major sections.

The Sarbanes-Oxley Act and the Securities Exchange Commission move too quickly when they prod the Financial Accounting Standards Board, the standard setter for US GAAP, to move immediately to a principles-based system. Priorities respecting reform of corporate reporting in the US need to be ordered more carefully. Incentive problems impairing audit performance should be solved first through institutional reform insulating the audit from the negative impact of rent-seeking and solving adverse selection problems otherwise affecting audit practice. So long as auditor independence and management incentives respecting accounting treatments remain suspect, the US reporting system holds out no actor plausibly positioned to take responsibility for the delicate law-to-fact applications that are the hallmarks of principles-based systems. Principles, taken alone, do little to constrain rent-seeking behaviour. In a world of captured regulators, they invite applications that suit the regulated actor's interests. Rules, with all their flaws, better constrain managers and compromised auditors. Broadbrush reformulations of rules-based GAAP should follow only when institutional reforms have succeeded.

The European Commission's May 2003 Action Plan ‘Modernising Company Law and Enhancing Corporate Governance in the European Union – A Plan to Move Forward’ includes a proposal for new legislation on wrongful trading with a view to strengthening the personal accountability of directors in the case of a company's failure. The proposal builds on expert opinions that the existing law on wrongful trading in Great Britain is better capable of activating an early managerial response to a financial crisis than the German Insolvenzverschleppungshaftung (liability for delaying insolvency). This article challenges the alleged superiority of wrongful trading over Insolvenzverschleppungshaftung. It provides a detailed analysis of the case law under section 214 of the British Insolvency Act, which does not support the fundamental assumption underpinning the European endeavour, namely, that wrongful trading routinely imposes duties on the directors ahead of the onset of insolvency. Furthermore, the protection afforded to creditors under British law is less extensive than under German law as regards the amount of compensation for the creditors and, correspondingly, the financial risk incurred by the directors. Finally, the article looks at the special treatment of new creditors (Neugläubiger) under German law, which has the advantage of giving creditors a strong incentive to pursue delinquent directors.

The new Limited Liability Company – New Firm Act in Spain is analysed as a compromise between a laissez faire legislature trying to speed up the process of incorporation of companies and lowering legal barriers to entry and interest groups that make a living through the regulation of entry. The substantive review of company contracts by registrars is criticised and some proposals for deregulation are made.

The two constitutional principles of subsidiarity and integration in the European Union clearly force the system to be one of jurisdictional competition. The text books still do not start from the assumption that diversity, and the tools for making it compatible with integration, are just as important an element of European company law as harmonisation. This paper argues that they should. This would then lead them to discuss in which areas there should be such competition, to identify the conditions for functioning competition and to try to suggest where and how to enhance it. Diversity clearly requires information. Therefore, the second core element of the structure of European company law consists of disclosure rules. These rules are indeed clearly dominant in European company law, be it in accounting law, the law of capital markets or in traditional EU Company Law Directives. On this basis, other important features – pairs of concepts – can also be explained: (1) the fact that European company law focuses on limited liability companies and sometimes exclusively on PLCs; (2) the fact that European company law is so extroverted, that is to say, the regulation of the third-party relationship is so dominant, that shareholders' rights are really regulated only insofar as the proportionate share is ‘constitutionally’ guaranteed; and (3) the fact that capital markets must clearly be seen as an integral part of European company law and may not be disregarded in any description.

While the corporate bankruptcy regime of the United States provides for a so-called debtor-oriented regime, many European corporate bankruptcy regimes could hitherto be labelled as creditor-oriented. Yet bankruptcy reform in Europe generally emphasizes the need for introducing schemes that facilitate business rescue, which has already led several European countries to add reorganization mechanisms to their bankruptcy laws. Surprisingly, on both sides of the Atlantic, policy makers pay little attention to corporate bankruptcy as a corporate governance mechanism. This paper argues that the comparative efficiency of corporate bankruptcy regimes cannot be considered separately from the governance structures of firms that make use of the bankruptcy laws. To evidence this, the paper analyzes two types of governance structure, namely that of the small and medium-sized firm with a concentrated secured bank lender and that of the publicly held firm with a dispersed ownership structure. This account gives rise to a reformulation of the trade-offs made by debtor- and creditor-oriented regimes and suggests that different optimal regimes may exist for different types of firms.

This article provides a critical overview of the latest spate of European Commission proposals on the reform of corporate governance in the EU. The authors suggest that most of the proposed measures are simply reactions to recent corporate governance fallouts and new legislation in the US. This article supplies evidence that the EC's measures are in fundamental disequilibrium with the core and supporting institutions of corporate governance in the EU. The authors conclude that the EU should, rather than embark on a complex exercise in harmonisation, build on the strength of its diversity and imitate the US where it is warranted.

The position of non-State actors – including individuals and non-governmental organisations, as well as private corporations and their respective business associations – in WTO law is one of the most contentious topics currently discussed in the field of international economic law. The purpose of this article is not only to show that this discussion raises fundamental questions as to the aims pursued by the WTO, but also to explore the possible consequences of the changing character of international economic law itself, which have so far been little noted in the legal literature. The article starts with an evaluation of the possibilities for individual rights granted to private actors by WTO law. In this connection, the authors come to the conclusion that, judged by its goals and its normative construction, the WTO legal order is not only suitable for according rights directly to individuals, but is actually designed precisely for this purpose. The authors continue with an analysis of the current legal and factual opportunities for non-State actors to participate in the decision-making processes and dispute settlement system of the WTO. In this regard, it is submitted that a number of non-State entities already play an important, albeit mostly informal role in the WTO at present. Furthermore, this participation is likely to increase in the future, due to the currently visible changes in the normative structure of the international economic system, which are leading to the evolution of what can most accurately be characterised as the development of a ‘transnational economic law’. Following an evaluation of these structural changes and their possible impact on the future role played by non-State actors in the international economic system, the article concludes that the WTO and other relevant international organisations obviously need to adapt to the changing normative structure of international economic law, in order to be able to continue performing the regulatory tasks assigned to them.

This study provides data on the attendance of shareholders and voting behaviour in listed Belgian companies between 1994 and 2003. It empirically analyses the relationship between the size of the corporation, the ownership structure and the attendance rate and describes some of the voting issues tackled at the general meeting. Further, the article presents the regulatory evolution of general meetings since 1994 and analyses whether the legal reforms have significantly influenced the attendance behaviour of shareholders.

On average, 57.2 per cent of the shares were represented at the ordinary general meeting. The total stake of identified shareholders and the stake of the concert parties positively influence the attendance. The average number of shareholders attending the meeting is 38. The size of the corporation and the number of concert parties significantly increase the number of attending shareholders.

The number of attending shareholders increased significantly between 1994 and 2003, while the attendance rate did not. The idea and importance of shareholder activism seem to trickle through, but the patterns that determine corporate policy have not changed. Small shareholders have the opportunity to ventilate their opinions, but the controlling shareholder and the board of directors make the decisions.

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.

Our analysis focuses on whether future changes in the GATS regulatory framework might eventually provide better outcomes in terms of trade liberalisation. We start our analysis by providing a succinct overview of the GATS framework of rules and principles, focusing in particular on the implementation of that framework so far. Then, we focus on three issues – public services, safeguards and domestic regulation – that may have important implications for the GATS regulatory framework. In doing so, we do not call into question the negotiating agenda as it has been established by negotiators and instead provide an evaluation on its merits. In two cases – safeguards and domestic regulation – the negotiating mandates are well established, while in the third case – public services – although no formal negotiation has been envisaged, the issue as such has the potential to influence negotiating outcomes in key sectors, such as education, health, postal, energy and environmental services.

In our view, the best solution to the ‘public services’ conundrum is not a drastic reduction of the scope of GATS by excluding specific sectors from its provisions. Instead, increased awareness of the stakes involved in the liberalisation of socially sensitive service sectors may help WTO Members shape their commitments in light of their political, social and economic interests in those sectors. In the case of safeguards, after providing an analysis of the main arguments for such a mechanism, we show that the existing framework can adequately take care of concerns arguing in favour of temporary protection. Unlike the negotiations on safeguards, no WTO Member seems to question the desirability of developing further disciplines on domestic regulation as they are understood by the GATS. After analysing the case for horizontal disciplines, we conclude that such a horizontal approach should be complemented without delay with a sectoral approach that could cater for specific regulatory problems not being addressed in the Article VI.4 work programme. In our view, there are good reasons to try to complement the horizontal approach with a sectoral focus that would likely take the form of additional commitments under Article XVIII GATS.

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 addresses the role and limits of regulation in telecommunications. The author puts forward seven hypotheses. First, the traditional arguments for regulation in the form of public enterprises (‘natural monopolies’) have become obsolete. Second, there is a continuing need for the special regulation of the incumbent. Third, the ultimate goal of this regulation should be to render itself superfluous. Fourth, it is essential that the regulatory agency be independent from political influence. Fifth, it is less important whether the regulatory power resides with a specialised agency or with a general competition agency. Sixth, procedural rules are necessary in order to support substantive regulation, for example, in connection with the need for ex ante regulation rather than ex post supervision, the asymmetry of the regulation focusing on the incumbent, the means to positively design market conditions, the need for speedy execution of the regulatory agency's decisions and the development of a principled rate regulation. Seventh, privatisation and the concurrent withdrawal of the state from the provision of telecommunications services in order to allow market forces to compete is the preferable solution.

The purpose of this article is to introduce and briefly analyse Croatian competition law in the light of EC competition law standards. The analysis will be kept at a general level, essentially offering an overview of Croatia's legislative framework in the field of competition law, including the Competition Law that was in force from 1995 until October 2003 and the new Competition Law that was enacted on 21 July 2003 and entered into force on 1 October 2003. An independent Croatian competition authority, the Agency for the Protection of Market Competition, was created in 1995 and began its work in 1997. The Agency is directly responsible to the Croatian Parliament. In addition, this article analyses the competition provisions of the EC-Croatia Stabilisation and Association Agreement, which was signed in October 2001 and is awaiting ratification by the EU Member States. An Interim Agreement including a number of competition rules has been in force since March 2002. In February 2003, Croatia applied for EU membership. The Commission is currently in the process of drafting its opinion on the application.

Scholars working in the ‘law and finance’ field have investigated empirically the links between various types of law and the incidence of venture capital finance. However, no study to date has systematically investigated the relationship between insolvency law – both personal and corporate – and venture capital finance. This paper argues that a nation's personal insolvency law may have an important impact on the demand for venture capital finance, with more severe treatment of insolvents tending to reduce demand. This hypothesis is subjected to a preliminary test by comparing data on venture capital investment activity with an index of ‘severity’ of insolvency laws, and is not falsified. This finding will be of interest to policymakers, as a number of recent national and EU initiatives have sought explicitly to encourage innovative firms and venture capital finance.

Before joining the European Union on 1 May 2004, Hungary entered into an Association Agreement with the European Community and its Member States on 16 December 1991. One of the most important aims of this Agreement (also known as the Europe Agreement) was to establish a free trade area between the parties to the Agreement, covering all trade between them, and to make progress towards realising the other economic freedoms on which the Community is based. As a tool for achieving these aims, Chapter III of the Europe Agreement prescribed the approximation of legal regulations. Of course, this approximation did not imply a two-way movement, but the one-sided approach of Hungarian law to the legal rules of the Community. The parties to the Agreement held that one of the basic conditions of Hungary's economic integration was to approximate the country's present and future laws to the laws of the Community. Hungary therefore undertook that as far as possible Hungarian legislation would be brought into accordance with the laws of the Community. The Europe Agreement indicated the main areas for the approximation of laws. Under Article 68 of the Agreement, approximation was also meant to take place in the area of company law.

A few years ago, there was an almost total absence of successful actions for damages in the field of the enforcement of EC public procurement rules. This has changed, as there are now several examples of successful actions in some Member States, including actions for loss of profit. This article analyses a number of fundamental questions of general interest concerning damages for the breach of public procurement rules. It considers the conditions for damages and the question whether a contracting authority can preclude actions for damages by inserting a time-limit for bringing proceedings in the tender conditions and suggests that this is not the case. Finally, it deals with compensation and the award of damages for potential loss of profit and trends in Danish case law regarding damages for the breach of EC public procurement law. The Danish Complaints Board for Public Procurement has emphasised the deterrent effect of damages and deviates from the ordinary Danish rules in its approach to damages in business relations in its leading case law.