Centros and the Cost of Branching

Journal of Corporate Law Studies, Vol. 9, Part 1, April 2009

29 Pages Posted: 15 Jul 2009

See all articles by Marco Becht

Marco Becht

Solvay Brussels School of Economics and Management (ULB); European Corporate Governance Institute (ECGI); Centre for Economic Policy Research (CEPR)

Luca Enriques

University of Oxford Faculty of Law; European Corporate Governance Institute (ECGI)

Veronika Edit Korom

University of Economics and Business Administration

Date Written: April 1, 2009

Abstract

Following the Centros, √úberseering and Inspire Art decisions of the European Court of Justice (ECJ), a thriving market for incorporations has developed in the European Union. Round-trip incorporation is competing with domestic incorporation. Entrepreneurs can set up a shell company in any EU jurisdiction and branch back to their home country to operate a business. The UK Limited Company (UK Limited) is a popular choice in many countries because it is rapidly and cheaply available online with minimum formalities. We have developed a taxonomy for measuring the cost of Limited round-trip incorporation. The cost of setting up a UK Limited is directly observable in the market while the cost of branching is not. We have run field experiments to measure the cost of branching. Our analysis reveals that despite the ECJ rulings, branching remains costly or impractical in many cases. Incorporation agents play an essential role in overcoming the limitations to branching.

Keywords: incorporation, costs of regulation, regulatory competition

JEL Classification: G38, K22

Suggested Citation

Becht, Marco and Enriques, Luca and Korom, Veronika Edit, Centros and the Cost of Branching (April 1, 2009). Journal of Corporate Law Studies, Vol. 9, Part 1, April 2009. Available at SSRN: https://ssrn.com/abstract=1433311

Marco Becht (Contact Author)

Solvay Brussels School of Economics and Management (ULB) ( email )

42 Avenue F. D. Roosevelt
1050
Brussels, 1050
Belgium
+32 2 6504466 (Phone)

HOME PAGE: http://www.solvay.edu/profile/marcobecht

European Corporate Governance Institute (ECGI) ( email )

Palace of the Academies
Rue Ducale 1 Hertogstraat
Brussels, 1000
Belgium

HOME PAGE: http://www.ecgi.global/users/marco-becht

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Luca Enriques

University of Oxford Faculty of Law ( email )

St Cross Building
St Cross Road
Oxford, OX1 3UL
United Kingdom

European Corporate Governance Institute (ECGI)

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

HOME PAGE: http:/www.ecgi.org

Veronika Edit Korom

University of Economics and Business Administration ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

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