Centre for European Company Law
Centre for European Company Law
Centre for European Company Law

2nd CECL Conference

Held on 20th September 2007 in Utrecht

Chaired by Professor Loes Lennarts, Utrecht University


Philippe Pelle,
Deputy Head of Unit, DG Internal Market and Services, European Commission: Companies Crossing Borders within Europe

Noelle Lenoir,
Of Counsel, Debevoise & Plimpton LLP, Paris, Former French Constitutional Judge and Former French Minister of European Affairs: The SE in Europe
Dr. Jochem Reichert,
Attorney, Partner of Shearman and Sterling LLP: Experience with SE in Germany
Ton Daniels,
Professor of International Tax Law at the University of Utrecht, the Netherlands, and tax partner at Ernst & Young, Amsterdam: Cross-border Mergers and Neutrality in Shareholder Taxation
Geert Raaijmakers,
Professor of Company and Securities Law at the University of Maastricht, the Netherlands: Creditor Protection
Ellen Kiersch,
Coordinating counsel for legislation, Dutch Ministry of Justice: The Dutch Implementation of the Tenth Directive on Cross-border Mergers
Koen Geens,
Professor of Company Law at the University of Leuven, and Partner, Eubelius Attorneys, Brussels, Belgium: Cross-border Mergers and Minority Protection
Gert-Jan Vossestein,
Lecturer in Company Law, at the University of Leiden, the Netherlands: Cross-border Transfer of the Registered Office of Limited Companies

Opening remarks: Marie-Louise Lennarts

Prof. Marie-Louise Lennarts reminded the audience that in 2007, the EU was celebrating its 50th anniversary and noted that although the EU, and especially company law, followed a long and winding road, to a certain extent there were also some achievements, such as the mutual recognition of companies, particularly enhanced by ECJ case law. Further developments concerning cross-border mobility of companies have been taking place in light of recently enacted company law legislation, inter alia the adoption of (i) the statute for the Societas Europaea; (ii) the Tenth Company Law Directive on Cross-border Mergers; and (iii) the proposal for a directive on cross-border transfer of the registered seat. Concerning the latter, Lennarts also took the opportunity to highlight the Cartesio case that was (and still is) attracting the interest of various specialists, given that its outcome might provide for new developments with regard to the transfer of the seat and the interpretation of Articles 43 and 48 EC Treaty. All these reforms justify both an individual and an integrated comparative analysis with a view to observe: whether and how they can be combined to provide an efficient and attractive business environment; how they are being implemented in the various Member States; and whether the protection of the various stakeholders potentially affected is actually being taken into account. Accordingly, all these issues were analysed by the distinguished scholars and practitioners who exposed and discussed their views at the conference.

First lecture: Philippe Pelle

Philippe Pelle, Deputy Head of Unit, DG Internal Market of the European Commission, started his lecture by analysing `corporate mobility' in the light of the developments observed regarding the four fundamental market freedoms guaranteed by the EC Treaty. Although thousands of companies are already operating throughout the Single Market, thereby taking advantage of corporate mobility, in certain situations some so-called hidden barriers' still hinder the legal mobility of companies. Is this simply a moot issue for lawyers, academics, and Commission officials? Or do these `hidden barriers' constitute real obstacles for entrepreneurs and therefore represent a potential loss for job creation and European economic growth? Pelle considered that economic evidence, in this regard, is insufficient.
Empirical data, with regard to intra-Community direct investment flows, was provided with a view to support the idea that economic integration was considerably enhanced during the last ten years by the `right of establishment'. Pelle argued that this degree of freedom has only been possible due to the adoption of certain common initiatives, which between 1968 and 1989 concentrated simply on setting up an equivalent level of protection of company members and third parties. Actually, at that time, corporate mobility was far from being on the EU's agenda. This situation has started to change nowadays with the adoption of the SE Regulation. Accordingly, Pelle reminded the audience of the European Company Statute's main advantages, especially the fact that it was the first piece of Community legislation allowing not only for cross-border mergers but also the transfer of the seat of a company to another jurisdiction. Despite its potential benefits, Pelle argues that the SE has been utilized by less companies than some would expect. On the whole, this can be explained by the complex negotiation procedure on workers' participation involved in the formation of an SE and also by the issue of the exit tax on the transfer of the seat of the SE, which is still unsettled. PelleA thus acknowledges that amendments shall be considered with the intention of turning the SE into a more attractive vehicle for mobility. Furthermore, the recently adopted Cross-border Mergers Directive seems to be a suitable tool which can be used to develop corporate mobility in Europe. Indeed, many experts suppose that companies attracted by the SE (as a vehicle to move their company to another Member State) may prefer to wait for the complete implementation of the Cross-border Mergers Directive, with a view to adopting one of the well-known national legal forms instead. However, Pelle underlined that the European Court of Justice (hereinafter `ECJ') has been playing a dominant role in moving boundaries forward. In fact, in his opinion, recent case law of the ECJ might have had even more impact on the freedom of establishment and the mobility of companies than any secondary legislation of the Community. The Centros judgment set a new trend for the incorporation of companies, i.e. entrepreneurs residing in Member States with high requirements and costs concerning the formation of companies began looking towards Member States with less stringent requirements and lower formation costs with a view to incorporating in those states, whilst carrying out their commercial activities in their Member State of origin. Hence, Centros triggered some form of `regulatory competition' between the different jurisdictions, giving incorporators the opportunity to `go cherry-picking from their armchair'. This analysis was supported by an empirical study,8 which demonstrated that the number of companies registered in the UK (regarded as a particularly cheap and efficient system for company formation) whilst running their business in another Member State, increased five times over between 2001, after the ECJ delivered its opinion in Centros, Ueberseering and Inspire Art, and 2005. The ECJ has, therefore, contributed to somewhat improving mutual recognition and acceptance of companies without any further requirements of a head office of a company incorporated in another Member State. Nevertheless, does that mean that companies can actually move freely, in particular that their registered seat or head office can be transferred within the EU? Against this background, Pelle noted that the Daily Mail jurisprudence remains intact, i.e. Member States are not completely prohibited to impose certain restrictions on the transfer of the real seat of a company (incorporated in accordance with its national law) to another Member State, provided that those restrictions are proportionate and based upon public interest grounds. Finally, Pelle wondered whether it made sense to adopt a directive on the transfer of seat or whether this issue can be better tackled by the ECJ, thereby allowing this court to continue extending the limits of the right of establishment for companies on a case-by-case basis. It seems that the adoption of a directive could facilitate the mobility of European companies, especially with regard to SMEs, and allow them to place their business in the Member State that best suits their needs and could also improve legal certainty. Pelle argued that there was almost no economic evidence to support the adoption of such a directive.
Conversely, this perspective was rejected in the last lecture by Vossestein who provided some arguments to support a contrary view. He regards this issue as a matter of principle, thereby concluding that it might be more appropriate for the Court to express its opinion. Hence, Pelle considered that the Cartesio case, pending before the ECJ, might give the Court a chance to deliver an opinion with regard to the transfer of both the registered seat and the real seat. In addition, the speaker took the opportunity to express his hope that the Court would push its doctrine on the right of establishment one step further. At the time the conference was held the Commission had not decided yet whether it would come forward with a proposal for a Fourteenth Company Law Directive.15 Notwithstanding, in October 2007, Commissioner McCreevy publicly affirmed his decision not to proceed with such a directive.

Second lecture: Noelle Lenoir

Noelle Lenoir, Of Counsel, Debevoise and Plimpton LLP Paris; Former Minister of European Affairs and Former Justice of the `Conseil Constitutionnel', France, and author of the report on `The Societas Europaea or SE, The new European company', which was commissioned to her by the French Minister of Justice, gave a detailed and optimistic account on the progress of the European Company (or Societas Europaea, hereinafter SE). Lenoir began her lecture providing information on the historical background of the European Company Statute, noting that the final outcome was a compromise statute with optional provisions. Although this legal entity is governed by two statutory texts, EC Regulation No. 2157/2001in relation to company law and Directive 2001/86/EC in relation to workers' involvement in the SE, it is also necessary to take into account the national law of the Member State where the SE has its registered office, not only to verify the SE's specific provisions, but also because the elements that are not addressed by the Regulation itself are referred to the national provisions applicable to public limited liability companies of that Member State. According to Lenoir, the Member States gave up the original plan of creating a simple and comprehensive statute with a `truly federal nature' and governed by autonomous EU company law because they feared that this new legal entity would escape their authority. In addition, the adoption process of the statute was hindered due to the different perspectives followed by Member States, particularly with regard to the level of employee participation that the statute should require, tax issues or even more general and structural issues such as the model the statute should aspire to follow. Despite this, Lenoir considers that the statute agreed upon constitutes an interesting and promising start and that it can be improved upon and simplified with the objective of becoming even more attractive as an instrument for European groups seeking management optimization, thereby contributing to avoiding any relocations outside the EU. After pointing out the SE's main features, the legal entities which can create an SE and the major steps that are usually involved in its creation, Lenoir took the opportunity to highlight the social dimension of the SE, reflected in the requirement to form a special negotiating body (SNB), composed of employee representatives and representatives of any company involved in the formation of the SE, who shall reach an agreement with regard to worker involvement in the SE. Furthermore, the employee participation rights in the newly formed SE cannot be lower than the rights existing prior to the establishment of the SE this is designated as the `Before/ After' Principle, which ensures, for example, as Reichert later asserted, that the formation of an SE cannot decrease the level of co-determination of its German founder company(ies). Indeed, this strong social dimension might be the reason why some segments of the business community still show reluctance to support this novel legal format. The former French Minister continued by presenting the main advantages offered by the SE, both political and operational. In fact, the basis for the adoption of the SE can be triggered by `political' motives, for instance where a group or company intends to clearly emphasize its European identity, especially where disparities between national cultures may initiate some tension. While this may be the case, the original motives behind the SE were essentially operational.
This is the only type of company that is able to fully benefit from freedom of establishment (primary and secondary), therefore, intra-community mobility is regarded by Lenoir as its foremost advantage, not only because it enables the transfer of the registered office throughout the Community, but also because without the transposition of Directive 2005/56/EC on cross-border mergers of limited liability companies, the SE statute was, at the time, the only mechanism enabling cross-border mergers within the Community, thereby encouraging external growth. In addition, it was upheld that the SE can be used as a strategic tool to simplify and rationalize internal structures; or even to harmonize the legal structure to manage a network of subsidiaries owned either by a European or foreign group. Lenoir mentioned some figures with regard to the registered SEs to illustrate the actual impact in practice and the real reasons underlying the adoption of SEs. In this respect, she noted that there were about ninety registered SEs, which considering the delay in the adaptation and transposition to the national laws can be regarded as a rather significant number: 42 per cent of those were registered in Germany; 25 per cent pertain to the financial and insurance sectors; and 15 per cent are `empty shells'. This exhaustive analysis was concluded with a brief reference to the most essential proposals that Lenoir developed in the above-mentioned report, which she delivered to the French Minister of Justice in March 2007. Among those proposals she highlighted the need: (i) to widen the range of means to create an SE; (ii) apply the registered seat theory; (iii) adopt a single applicable legislation to the constitution of an SE by cross-border merger; (iv) create a European Companies' Register; and (v) harmonize the corporate tax base.

Third lecture: Jochem Reichert
Jochem Reichert, Attorney, Partner at Shearman and Sterling LLP, Germany, presented a lecture on the experience with the SE in Germany. By the same token as Lenoir in the previous lecture, Reichert began by underlining the dual nature of the European Company, i.e. on the one hand regulated by the SE Regulation and the SE Directive24 that govern the main features of the SE, and on the other hand also regulated by national law.25 Considering the specifics of German Corporate Law, it is particularly interesting to take a closer look into the application and impact of the SE in Germany. Reichert, like Lenoir, made use of the latest statistics on SEs with a view to prove that the SE is very successful in Germany and to analyse the reasons behind the adoption of this new legal form. In fact, 40 per cent of the SEs created in Europe were established in Germany and most of them are still in existence. Eleven of those were established as shelf companies. It was also noted that eleven of the SEs created in Germany opted for a one-tier structure. Although most of the companies at stake are smaller enterprises, there are also a few examples of large company groups that opted for the SE, such as Allianz, BASF, Fresenius and Porsche. Against this background, according to Reichert, there are several different motives behind the decision of German companies to establish an SE. To begin with, the facilitation of cross-border mergers was referred to as one of the reasons why Allianz adopted the SE. However, this motive loses part of its relevance due to the transposition of the Cross-border Merger Directive that aims directly at lifting obstacles to that type of transaction. In addition, in Germany, the transfer of the registered office to another Member State is currently not permitted without dissolution and liquidation.
Therefore, the SE can be a way to make the transfer of the registered office easier. This was regarded by Reichert as an `exclusive structural privilege of the SE', especially because it enables companies to choose their seat in accordance with the existing economic conditions. Secondly, Reichert made reference to a motive designated by Lenoir in the previous lecture as a political motive, which is the European image of the SE.
Although the relevance of this factor is difficult to measure, it is often used with a view to reduce national concerns when companies with a long tradition and a strategic role in a certain Member State merge and register in another Member State. Once the companies merge into an SE the deal tends to be perceived as a merger of equals, rather than a takeover. Thirdly, Reichert highlighted the importance of the possibility of creating an SE in Germany with the objective of enhancing flexibility in codetermination for large companies. Although co-determination was a particularly controversial issue in the creation of the SE statute, eventually the Member States agreed upon a solution that is more flexible than the German Co-Determination Act.26 Therefore, the SE requires the formation of a Special Negotiating Body (hereinafter SNB) where employee representatives and representatives of any companies involved in the creation of the SE must negotiate the model of co-determination to be adopted.
Where no agreement is reached, the strictest regime of employee involvement applies, i.e. the Co-Determination Act applies if a German company is involved in the SE formation. Accordingly, on the whole, the level of co-determination shall not fall below the level of the German founder company. This was what Noelle Lenoir designated in the previous lecture as the `Before/After Principle'. Although the level of co-determination might remain the same, this more flexible solution can be especially appealing for large German companies since it (i) provides them with the opportunity to negotiate an employee participation model specifically adapted to the company's structure and needs; (ii) provides the possibility of decreasing the size of the supervisory board, thereby enhancing efficiency; and (iii) further, the German SE extends the co-determination to Europe because the SNB mentioned above requires the mixture of representatives from different countries. Fourthly, Reichert noted that codetermination is also relevant for medium-sized enterprises, which use the SE with a view to avoid crossing the threshold for a more stringent form of co-determination. The fifth reason advanced by Reichert to explain the choice of the corporate form of an SE is connected with the governing structure. This aspect is particularly relevant with regard to Germany for the reason that German stock corporations must have a two-tier system, whilst the SE gives the companies the possibility of choosing between the one-tier or two-tier management model. The two-tier SEs are largely governed in the same manner as German stock corporations, with some additional possibilities regarding the governance structure, for example, the chance of determining higher majority requirements that can strengthen minority shareholders. The one-tier model is particularly difficult to conciliate with co-determination because it would be extended to the administrative organ that holds management authority. Reichert considers the one-tier model can be especially advantageous not only for small companies and groups with many subsidiaries, in order to set up a tighter management structure; but also for family-owned companies. In the end, the lecturer expressed his disagreement with those who consider that the introduction of the uniform legal structure of an SE for subsidiaries would lead to significant savings in administrative costs and consultancy fees, in particular because, in his opinion, there are still substantial differences between the SEs of each Member State. Reichert adopted a relatively more practical approach to the issue in analysis and asserted that the SE is a very successful legal form in Germany, thereby an interesting alternative to consider while deciding to incorporate a firm. In addition, he considered that the implementation had occurred normally without any significant potential for problems.

Fourth lecture: Ton Daniels

Ton Daniels, Professor of International Tax Law at the University of Utrecht, the Netherlands, and Tax Partner at Ernst & Young, Amsterdam, the Netherlands, discussed the issue of cross-border mergers and neutrality in shareholder taxation. The lecturer drew attention to three core tax aspects of cross-border mergers: (i) exit taxes upon corporate emigration; (ii) up-front tax cost in corporate mergers; and (iii) taxation of domestic and foreign dividends. Generally speaking, harmonization in the field of business taxation aims at eliminating distortions and removing obstacles to cross-border activities to promote equal treatment between internal mergers and cross-border mergers, thereby enhancing the creation of companies with a real European dimension. At first, Daniels remarked that current legal systems tax their own residents; therefore, where companies are allowed to change their registered office interesting questions might arise. `Can an EU Member State levy an exit tax?' In this respect, according to the Merger Directive,28 that intends to facilitate restructuring operations involving companies of different Member States, the transfer of the registered office of an SE shall not lead to any taxation of capital gains for those assets and liabilities that remain effectively linked to a permanent establishment located in the Member State from which it is being transferred. In addition, the lecturer referred to the ECJ judgment in Lasteyrie du Saillant,29 where the court stated that the freedom of establishment principle must be construed as precluding a Member State (interested in preventing a risk of tax avoidance) from setting up mechanisms to tax yet unrealized increases in value when a taxpayer transfers his residence outside that state. Daniels also mentioned the Merger Directive to show that where a company of a Member State acquires a holding in a company from another Member State, obtaining a majority of the voting rights, in exchange for its own shares and, if applicable, for a certain cash payment (not higher than 10 per cent of the nominal value of issued shares), the target company shareholders are not subjected to capital gains taxation.
Finally,Daniels argued that according to the ECJ the freedom of movement of capital implies that outbound investment income and domestic investment income are taxed in an equal way. That is to say, that where the tax for domestic dividends is reduced with imputation credit with a view to taking corporate tax into account, then the same shall apply to foreign dividends, even if there is no collection of any corporate tax from the foreign company. Although this system is very expensive with regard to foreign dividends, it contributes to preventing the problem of double taxation. As a result, domestic and foreign dividends are taxed at low flat rates, whilst labour is taxed at progressive rates. The elements analysed by Daniels reflect concerns to ensure neutrality in shareholder taxation and prevent double taxation with the intention of facilitating restructuring operations involving companies of different Member States.

Fifth lecture: Geert Raaijmakers

Geert Raaijmakers, Professor of Company and Securities Law at the VU University of Amsterdam, the Netherlands, and Corporate Partner at Nauta Dutilh, Amsterdam, the Netherlands, opened the afternoon session giving an account outlining creditor protection in cross-border mergers. First, he discussed the position of creditors in mergers under Dutch law, underlining the instruments available for creditor protection, such as the possibility to object to a merger, the right to claim security or similar safeguards,30 and the opportunity given to the parties to a contract to request amendment of the contract, under certain circumstances. Under Dutch law there are also specific provisions pertaining to pledges and usufruct that aim at protecting the position of creditors. Furthermore, Raaijmakers noted, the parties (non-shareholders) with special rights in the disappearing company, shall be offered an equivalent alternative in the acquiring company, or as a substitute, damages.31 Although there are different systems of creditor protection, the Third Company Law Directive harmonized some material aspects of creditor protection in cross-border mergers. In this respect, Raaijmakers stressed: (i) the adequate protection for creditors with unmatured receivables; (ii) appropriate safeguards where the financial situation of the companies so require; and (iii) flexibility to set differences in protection, where necessary, for creditors of the acquiring company and the disappearing company.
Notwithstanding, in practice, there are various approaches to creditor protection. The divergent ex ante and ex post approaches to creditor protection are good examples. On the one hand, the Netherlands and France follow the ex ante approach to protection. To be precise, they promote protection before the merger date, which can delay, but not hinder the merger, whilst assuring legal certainty once the merger is completed. On the other hand, Germany follows the ex post approach, whereby creditors can only claim their rights after the merger, and consequently means that the completion of the merger cannot be delayed. It goes without saying that where companies of jurisdictions that follow different approaches are involved in a cross-border merger, there will be problems to conciliate the type of protection provided. The Cross-border Mergers Directive does not comprise any specific rules with regard to creditor protection. Accordingly, this aspect is referred to provisions of national law which would apply in the case of a national merger.
In fact, the only reference to `creditors' in the whole directive is in Article 6 section 2(c), however, this article is very vague. Raaijmakers took the opportunity to refer to the Winter Report (2002), which upheld the idea that there would be considerable advantages in applying the same type of provision (regarding creditor protection) to all restructuring transactions for the sake of simplicity. This is also in line with Article 32 of the amended Second Company Law Directive. In conclusion, Raaijmakers argued that harmonized rules on creditor protection can be important to make the cross-border merger process smoother and more efficient. The adoption of uniform rules is tempting but might involve considerable delay and the amendment of the Tenth Directive may be unrealistic at this stage.
However, a better solution may be to prepare an amendment to the Third Directive, concerning these issues.

Sixth lecture: Ellen Kiersch

Ellen Kiersch, Coordinating Counsel for Legislation for the Dutch Ministry of Justice, was to deliver a lecture on the implementation of the Tenth Company Law Directive in the Netherlands. Kiersch began by regretting the fact that the Dutch Parliament, at the time the conference took place, had not yet discussed in plenary session the legislative proposals for implementation of the Directive. Therefore, at that point, due to her position as Coordinating Counsel for Legislation, she could not advance any precise information as to the implementation itself. Accordingly, on the whole she opted for addressing the Dutch Company Law reform project. In her view, the adoption of the Tenth Directive emerged in the framework of the growing concerns, at the national and European levels, surrounding the issue of companies crossing borders within Europe and the need to facilitate such mobility. The Tenth Directive is particularly different from most of the older directives, in the sense that it does not comprise substantive standards or many company law rules. According to Kiersch, if one considers that this directive requires the Member States to recognize crossborder mergers that were performed according to national rules, then it should be concluded that it is essentially a directive with features of international private law. The material rules pertaining to mergers of public limited liability companies were set up in 1978 with the adoption of the Third Company Law Directive. Kiersch noticed that despite the fact that in the 1960s the main aim at the European level was the harmonization of company laws (to a certain extent to avoid the emergence of a European `Delaware'), since the beginning of the 1990s the focus seemed to be moving towards the benefits of divergence and regulatory competition. As a matter of fact, the Fifth Company Law directive was never adopted and the SE is far from being the supranational instrument that was initially envisaged. The Dutch Company Law reform project delivered to Parliament in 2004 comprised inter alia the objective of providing business with competitive and efficient legal forms capable of answering to different needs. The Tenth Directive fits precisely in this modernization framework since it aims at facilitating the use of attractive national legal forms. Against the background of the implementation, the Netherlands introduced (i) a bill addressing cross-border merger of both public and private limited liability companies; (ii) an innovative minority protection rule with a view to prevent unfair squeeze-outs by the majority; and (iii) obviously implemented the rules on co-determination with the intention of avoiding undue loss of co-determination, since the Netherlands (like Germany) has a tradition of co-determination.
The latter is seen by Kiersch as a potential issue of discussion in the future as a result of the above-mentioned company law modernization programme. Furthermore, in 2004 the Netherlands enacted a Bill with the intention of strengthening the shareholders' rights, such as the approval of certain business operations; appointment/removal of supervisory board members; or the power to influence the annual meeting agenda.
Although the topic of crossing borders is seen as a positive movement in several circles, it gives rise to some new issues that have to be addressed. According to Ellen Kiersch this may urge the Government to take some important decisions. While the Netherlands may be interested in attracting finance and business, on the other hand, there may also be some `voices', especially from the business community and from employees, who are, for instance, demanding that the Government raise obstacles to hostile takeovers. Therefore, we can conclude that there are important choices to be made regarding the contents of Dutch and European Company legislation with a view to improve the aggregate welfare of the companies, as well as their stakeholders.To attain this objective is no simple task, since one may have to find the right balance in the separation of powers within the company.

Seventh lecture: Marieke Wyckaert

Marieke Wyckaert, Professor of Company Law, University of Leuven (K.U.L.) and Attorney, Partner at Eubelius Attorneys, Brussels, Belgium, presented a lecture on minority protection in cross-border mergers. Prior to the Cross-border Merger Directive, there was the Third Directive on Mergers of Public Limited Liability Companies (1978), which only covered national mergers and had no specific rules on minority protection, apart from Article 28 that provided the minority shareholders with a sell out right for cash, thereby simplifying the merger procedure. The SE Regulation also comprised provisions referring to the protection of minority shareholders. Moreover, the Takeover Bid Directive includes a sell-out right, aimed directly at protecting minority shareholders, and the mandatory bid rule.
However, the latter, as observed by Wyckaert, provides protection for a `very large' minority, which is also very expensive. The Cross-border Mergers Directive itself contains several direct references to the protection of minority shareholders, such as: (i) protection for those minority shareholders who are opposed to the merger; (ii) publication of the merger draft terms that includes arrangements for the exercise of minority shareholders' rights; and (iii) a requirement to obtain the approval of an Extraordinary General Meeting (EGM) of other merging companies concerning minority compensation schemes that do not avoid merger registration. The Directive that had to be transposed by 15 December 2007 offered considerable leeway to the Member States as to how to implement the rules. In view of that, Wyckaert mentioned the options that some Member States were planning to take, considering their drafts for the transposition of the directive. Germany, for example, opted to give minority shareholders the possibility of challenging the merger itself and also the exchange ratio. The right of withdrawal for shareholders of the absorbed company can be found on the transposition drafts of Germany, Italy and the Netherlands. Conversely, the French, English and Belgian drafts did not contain any specific protection for minority shareholders. Minority protection involves different levels of protection, to be precise: (i) information, comprising the merger proposal, management report on the merger and independent expert report; (ii) consultation (normally, a qualified majority and quorum are required),41 since a merger is a `democratic' decision, it includes decision making rights; (iii) contestation, that consists in the right to challenge the merger, be it pre or post merger; and finally (iv) specific minority rights, for instance monetary compensation rights, withdrawal rights, or appraisal rights. Regardless of the level or model adopted, one wonders who the minority shareholders actually are. For example, we could be dealing with shareholders voting against the merger, shareholders not voting in favour or even all shareholders of the merged entity as of a certain threshold. According to Wyckaert, the answer depends on the perspective one adopts with regard to shareholder activism and, indeed, a broad perspective is very likely to be particularly expensive. Wyckaert also took the opportunity to advance a few reasons that in her view can serve the purpose of explaining why we shall provide such protection: (i) change of corporate form; (ii) submission to a foreign company law; (iii) divergence as to the valuation of merging companies or exchange ratio; or even (iv) a `change of control'. Wyckaert raised many questions but did not tackle them all since her goal was essentially to bring those issues to the centre of the discussion.
In her concluding remarks, Wyckaert noted that the level of harmonization on minority protection is low. While protection is permitted, it is not mandatory; the nature and scope of the protection are unspecified; and the underlying rationale and tax consequences are unclear.

Eighth lecture: Gert-Jan Vossestein

In the closing lecture, Gert-Jan Vossestein, Lecturer in Company Law at the University of Leiden, the Netherlands, discussed the cross-border transfer of the registered office of limited companies. The adoption of a Directive specifically for this purpose was considered a short-term priority in the Action Plan on modernizing Company Law. Furthermore, different consultations by the European Commission and the Advisory Group on Corporate Governance and Company Law expressed considerable support for a Directive and the Directive was even included as a priority initiative in the Commission Legislative and Work Programme 2007. Despite these facts, Vossestein noted that (at the time of the conference) the EU Commission had decided to postpone the submission of a proposal for such a Directive.
Since then, in October 2007 Commissioner McCreevy publicly affirmed his decision not to proceed with such a Directive. The outline of the planned proposal for a Directive published by the Commission in 2004 states that a company which transfers its registered office would be registered in the host Member State and would acquire legal personality there, whilst being removed from the register in its home Member State and giving up its legal personality there. In this regard, Vossestein highlighted that during a transfer of the registered office, although there is a change in nationality, the company's legal personality is retained.
Further, in certain situations, companies would have to adjust their structures and assets with the purpose of meeting the requirements for registration in the host Member State. However, they would not be bound to go through liquidation proceedings in their home Member State or to create a new company in the host Member State. According to Vossestein, the essential element of the transfer of a company's registered office would be a change in applicable law. This might be held by some as an advantage since it might trigger regulatory competition. The lecturer proceeded, identifying cases that contributed to lifting barriers to the freedom of establishment. Article 43 EC Treaty prohibits restrictions on freedom of establishment on the part of the host Member State, as interpreted in Centros, Uberseering and Inspire Art. However, this article also prohibits restrictions on the part of the Member State of origin. An example would be exit restrictions, such as in Daily Mail,45 and more recently in Marks&Spencer. Whatever the case may be, ECJ jurisprudence on the interpretation of the prohibition of Article 43 EC Treaty evidences that the first question to be analysed is the applicability of the Treaty provisions on freedom of establishment, and only after, it shall be considered the existence of any restriction and whether such a restriction is justified and proportionate. In accordance with Article 48 EC Treaty, the personal scope of the freedom of establishment, is left to the Member States' discretion, i.e. they can choose the connecting factors that they consider appropriate, as stated in Daily Mail and Uberseering.
Therefore, Community Law must respect that choice, even if that law adopts the real seat doctrine, and accept its consequences, which could include the loss of legal personality if the real seat is transferred, thereby losing access to freedom of establishment.47 However, Vossestein noted that with a transfer of the registered office, within the meaning of the Fourteenth Directive draft proposal, legal personality would be retained in full. As a result, in his view, the above-mentioned considerations would not constitute an obstacle for a company to rely directly on Articles 43 and 48 with the intention of requesting transfer of its registered office to another Member State. Furthermore, in Sevic48 the ECJ extended cross-border mobility by applying the freedom of establishment to cross-border mergers and opening the door to also applying it to other cross-border restructuring operations, such as de-mergers, as Vossestein mentioned in response to a question raised by chairperson Marie-Louise Lennarts. What, then, are the reasons underlying the EU Commission's decision to postpone (and now abandon) the planned proposal for the Fourteenth Directive? According to Vossestein, those reasons are essentially connected with (i) political feasibility, (ii) alleged lack of economic evidence (such as previously held by Pelle) supporting the adoption of such a Directive; and the (iii) forthcoming (above-mentioned) judgment of the ECJ on Cartesio The economic argument against a Directive is based upon the idea that companies already have mechanisms at their disposal to perform a cross-border merger and transfer their registered office, namely the European Company (SE) and now the Crossborder Mergers Directive, more precisely by means of a downstream merger. Nevertheless, Vossestein if of the opinion that these methods involve considerable disadvantages (such as high costs, number of operations and legal systems involved), which a Directive specifically aimed at enabling the transfer of the registered office would certainly avoid. Indeed, he believes that such a Directive could lead to a simplified procedure and would be cost-saving. It could further strengthen crucial EU principles such as the freedom of establishment and, whilst facilitating changes in the company law regime, it might help to attract investors and lenders, especially if the company is going public or is willing to raise finance for growth. Moreover, where the most important part of a company's business has moved to another Member State, the companies and persons from the host Member State who are willing to enter into contracts and transactions with the company, can rely upon the usual guarantees that are normally available when they operate with companies from their own Member State, thereby reducing information costs. Another advantage can be pointed out for companies having to meet the real seat requirement, since a transfer of the registered office would also permit a transfer of the head office.
In conclusion, regardless of the outcome of the Cartesio case and the possible `new insights' upon corporate mobility in Europe that it might trigger, Vossestein considered that there remains a need for a Directive on the transfer of the registered office. Should the Court decide that the Hungarian company could transfer its registered office to Italy on the basis of Articles 43 and 48 EC Treaty, the Directive would still be justified because Article 43 EC Treaty pertains only to individual cases, whilst the Directive envisages to ensure, in a general and systematic manner, that restrictions are removed. Should the Court conversely dismiss a transfer of the registered office on the basis of Article 43 EC Treaty, then the Directive would also make sense, requiring the Member States to actually provide for a crossborder transfer of the registered office.

A report on this conference can be found in European Company Law 2008-02 by Tiago Pereira Monteiro.