Incorporating under European Law: The Societas Europaea as a Vehicle for Legal Arbitrage

33 Pages Posted: 15 Dec 2008

See all articles by Horst Eidenmueller

Horst Eidenmueller

University of Oxford; European Corporate Governance Institute (ECGI)

Lars Hornuf

University of Bremen - Faculty of Business Studies and Economics; Max Planck Institute for Innovation and Competition; CESifo (Center for Economic Studies and Ifo Institute)

Andreas Engert

Freie Universit├Ąt Berlin, Department of Law; European Corporate Governance Institute (ECGI)

Date Written: December 15, 2008

Abstract

After a slow start, the European Company (Societas Europaea, SE) has become increasingly popular. Beside documenting the growth of this new company type, we examine whether firms choose to incorporate in the SE corporate form because they engage in 'legal arbitrage' by exploiting differences in legal rules between jurisdictions. We specify a number of hypotheses on particular legal arbitrage motives. To validate our hypotheses, we use a broad telephone survey among SE users in Germany as well as a simple country-level regression model based on a unique, hand-collected dataset on SE incorporations. We find strong evidence that firms use the SE to mitigate the effect of mandatory co-determination rules. Establishing a one-tier board structure (in jurisdictions that impose a two-tier structure on their national public companies) and taking advantage of the SE's mobility for tax purposes also seem to be driving SE formations. By contrast, our analysis fails to support the suggestion that firms use the SE to shop for the most favourable national company law to fill the gaps in the SE Regulation.

Keywords: legal arbitrage, regulatory arbitrage, regulatory competition, charter competition, Societas Europaea, European Company, EC company law, incorporation

JEL Classification: G34, G38, K22

Suggested Citation

Eidenmueller, Horst G. M. and Hornuf, Lars and Engert, Andreas, Incorporating under European Law: The Societas Europaea as a Vehicle for Legal Arbitrage (December 15, 2008). Available at SSRN: https://ssrn.com/abstract=1316430 or http://dx.doi.org/10.2139/ssrn.1316430

Horst G. M. Eidenmueller

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Lars Hornuf

University of Bremen - Faculty of Business Studies and Economics ( email )

Bremen, D-28359
Germany
+49 89 20348619 (Phone)

HOME PAGE: http://www.hornuf.com

Max Planck Institute for Innovation and Competition ( email )

Marstallplatz 1
Munich, Bayern 80539
Germany

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Andreas Engert (Contact Author)

Freie Universit├Ąt Berlin, Department of Law ( email )

Boltzmannstr. 3
Berlin, 14195
Germany

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

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