Centros and Defensive Regulatory Competition: Some Thoughts and a Glimpse at the Data

47 Pages Posted: 7 Aug 2019 Last revised: 24 Sep 2019

See all articles by Martin Gelter

Martin Gelter

Fordham University School of Law; European Corporate Governance Institute (ECGI)

Date Written: August 6, 2019

Abstract

This paper looks at the phenomenon of “defensive regulatory competition” in European corporate law following Centros, Überseering and Inspire Art. In order to retain control over the corporate governing private limited entities operating within their territories and to prevent the proliferation of “foreign limited” formations, Member States have modified some of the features of their laws that company founders considers most unattractive, such as minimum capital and time-consuming incorporation procedures. The first part of the paper analyzes the market for the law governing privately held firms, drawing from the debate in the United States. The US and Europe differ in that regulatory competition, as far as substantive law is concerned, focuses mainly on ex post mechanisms such as directors’ duties and veil piercing. By contrast, European competition seems to be driven by ex ante issues relating to firm formation, such as minimum capital. The second part of the paper draws from an ongoing empirical research project that attempts to explore the effects of regulatory competition and uses reforms in Germany and Belgium as examples. Regression analysis suggests that at least the German 2008 reform had a minor effect on the number of UK private limited companies being set up to do business in Germany.

Keywords: regulatory competition, insolvencification, regulatory arbitrage, Austria, Netherlands, Inspire Art

JEL Classification: D22, G34, K22

Suggested Citation

Gelter, Martin, Centros and Defensive Regulatory Competition: Some Thoughts and a Glimpse at the Data (August 6, 2019). Forthcoming, European Business Organization Law Review; Fordham Law Legal Studies Research Paper ; European Corporate Governance Institute - Law Working Paper No. 472/2019. Available at SSRN: https://ssrn.com/abstract=3433142 or http://dx.doi.org/10.2139/ssrn.3433142

Martin Gelter (Contact Author)

Fordham University School of Law ( email )

150 West 62nd Street
New York, NY 10023
United States
646-312-8752 (Phone)

HOME PAGE: http://www.fordham.edu/info/23135/martin_gelter

European Corporate Governance Institute (ECGI)

HOME PAGE: http://ecgi.global/users/martin-gelter

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