Pandemic-Resistant Corporate Law: How to Help Companies Cope with Existential Threats and Extreme Uncertainty During the Covid-19 Crisis

European Company and Financial Law Review (Forthcoming)

European Corporate Governance Institute - Law Working Paper No. 530/23020

22 Pages Posted: 8 Jul 2020

See all articles by Luca Enriques

Luca Enriques

University of Oxford Faculty of Law; European Corporate Governance Institute (ECGI)

Date Written: June 29, 2020

Abstract

This essay argues that, to address the Covid-19 crisis, in addition to creating a special temporary insolvency regime, relaxing provisions for companies in the vicinity of insolvency, and enabling companies to hold virtual meetings, policymakers should tweak company law to facilitate equity and debt injections and address the consequences of the extreme uncertainty faced by European firms. After some general reflections upon the type of rules that are needed in these exceptional times, examples of temporary corporate law interventions for the emergency are provided. Specifically, rules to facilitate injections of equity capital and shareholder loans are suggested, together with relaxations of directors’ liability rules and measures to protect firms against hostile takeovers. All of these measures should apply merely by default and only for so long as the emergency lasts. The essay concludes with some thoughts about how to make normal-times corporate law ready for similar emergencies in the future. The goal is both to reduce the risk that the temporary extreme measures enacted for this crisis are made permanent under the pretence that another crisis may hit again and to have quick adaptation mechanisms already in place to respond to such a crisis.

Keywords: Corporate Law, Covid-19 Crisis, Uncertainty, Equity issuance, Directors Liability, Hostile takeovers, Shareholder activism, Loyalty shares

JEL Classification: G38, K22

Suggested Citation

Enriques, Luca, Pandemic-Resistant Corporate Law: How to Help Companies Cope with Existential Threats and Extreme Uncertainty During the Covid-19 Crisis (June 29, 2020). European Company and Financial Law Review (Forthcoming), European Corporate Governance Institute - Law Working Paper No. 530/23020, Available at SSRN: https://ssrn.com/abstract=3641505 or http://dx.doi.org/10.2139/ssrn.3641505

Luca Enriques (Contact Author)

University of Oxford Faculty of Law ( email )

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