Does Charter Competition Foster Entrepreneurship? A Difference‐In‐Difference Approach to European Company Law Reforms
17 Pages Posted: 28 Mar 2013
Date Written: May 2013
This article explores how company law reforms, particularly the reduction or abolition of minimum capital requirements, in various European jurisdictions affect the decision of entrepreneurs to incorporate by means of a private limited liability company (LLC). Since the landmark rulings of the European Court of Justice (ECJ) in the years 1999, 2002 and 2003, entrepreneurs in the European Union (EU) have been able to choose the country of incorporation independently of their real seat. As a result, the proliferation of the United Kingdom private company limited by shares has posed a competitive threat to many European legislators. The article analyzes whether the reforms adopted in Spain, France, Hungary, Germany and Poland have promoted the popularity of domestic legal forms and encouraged entrepreneurship more generally. Using a difference‐in‐difference approach, a strong impact is recorded in both respects, especially if the minimum capital requirement was reduced or abolished.
Suggested Citation: Suggested Citation