A Proposal for Reforming Group Law in the European Union - Comparative Observations on the Way Forward
39 Pages Posted: 11 Oct 2016 Last revised: 24 Oct 2016
Date Written: October 8, 2016
The legal regime applicable to groups of companies in the European Union has been discussed for many years. National legislations have been adopted in a certain number of member states, and new initiatives are being considered by the European Commission and in academic writing. The central issues in groups of companies is the relationship between the controlling shareholder, often the parent company and the subsidiaries, and the potential for abuse to the detriment of the latter’s minority shareholders and creditors. Several answers have been formulated, going from a duty of the parent to indemnify the subsidiary for the charges imposed by the parent, to the acceptance of these charges provided they result in some benefit to the subsidiary and provided they do not endanger the subsidiary’s solvency. In a third approach, these issues may be solved by other common company law, e.g. on the basis of the unfair prejudice provisions. With respect to shareholder and creditor protection, a comparative analysis concludes that there is no need for additional regulatory safeguards. The present approaches indicate that group relations are often characterised by conflicts of interest. Therefore, it is proposed to develop a standard for dealing with these, especially under the form of Related Party Transactions. The specific conditions for dealing with intragroup related party transactions are submitted for further discussion.
Keywords: Parent-Subsidiary Relations, Minority and Creditor Protection, Related Party Transactions, European Regulation
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