Regulatory Competition in European Company Law. Where Do We Stand Twenty Years after Centros?

Abstract

This article provides an overview of freedom of establishment and developments in the European market for corporate charters twenty years after the ECJ's important Centros decision of March 1999. Both for initial incorporations and reincorporations, ECJ case law has emerged as a key driver in providing the demand side the possibility to freely choose the applicable law. In fact, private limited companies in particular have reacted positively to the opportunities offered. From the supply side perspective, Member States have responded to the new challenges, particularly with respect to the relaxation of the minimal capital requirements of private limited liability companies. Nevertheless, the recent Kornhaas case of 2015 has complicated the picture of the European market for corporate charters, with the possible intersections between company law and insolvency law that may modify the incentives for a free choice of company law.

Keywords: EU company law, Centros, Freedom of establishment, Regulatory competition, Regulatory arbitrage

JEL Classification: K20, K22