The Evolving Structure of Directors' Duties in Europe

Posted: 21 Aug 2014

See all articles by Carsten Gerner-Beuerle

Carsten Gerner-Beuerle

University College London - Faculty of Laws

Edmund-Philipp Schuster

London School of Economics - Law Department

Date Written: June 2014

Abstract

Corporate mobility in Europe continues to be on the rise, both creating space for regulatory arbitrage by companies and influencing legislative decisions in corporate law and related fields. This has triggered debates in European company law that centre on questions of harmonisation, cross-jurisdictional convergence and the superiority of certain regulatory approaches and legal families. This article uses a large cross-country sample of EU Member States to classify legal strategies in corporate governance and assess claims of convergence and the superiority of legal families. We analyse board structure, the most important duties of directors, namely the duties of care and loyalty, questions of enforcement, and the position of directors in the vicinity of insolvency, and develop a taxonomy of legal strategies across the Member States. We find that, in spite of differences in regulatory technique and legal tradition, the effect of the legal strategies employed by the Member States is often remarkably similar and legal systems exhibit interconnections in the form of mutual learning across borders. In addition, we show that, in contrast to claims by parts of the literature, judicial innovation is not restricted to particular legal families. We argue that all legal families are, in principle, well equipped to react to new developments and draw on general or unwritten principles of law to fill regulatory gaps. However, a precondition for the emergence of effective rules seems to be a sufficiently large body of case law and, accordingly, access to the courts and an efficiently functioning judicial system. Consequently, we submit that questions of enforcement are of greater importance than a particular legislative or regulatory style.

Keywords: directors' duties, duty of care, business judgment rule, duty of loyalty, vicinity of insolvency, derivative action, legal transplants

JEL Classification: K22

Suggested Citation

Gerner-Beuerle, Carsten and Schuster, Edmund-Philipp, The Evolving Structure of Directors' Duties in Europe (June 2014). European Business Organization Law Review, Vol. 15, No. 2, 2014. Available at SSRN: https://ssrn.com/abstract=2483100

Carsten Gerner-Beuerle

University College London - Faculty of Laws ( email )

Gower St
London WC1E OEG, WC1E 6BT
United Kingdom

Edmund-Philipp Schuster (Contact Author)

London School of Economics - Law Department ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

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