Establishing a framework for European business and industry

Professor Paul Krüger Andersen has headed the first comparative analysis of company laws in the EU member states and have formulated a series of best practice recommendations. Several EU countries have already implemented parts of the recommendations which are expected to strengthen European business and industry.

2015.09.09 | Andreas G. Jensby

Strongly inspired by the US where diverging company laws in the different states have previously resulted in major problems internally between the states, professor of company law, Paul Krüger Andersen from Aarhus University, together with an international research team, has analysed the company rules in the EU countries and described a best practice which the countries can apply when revising their company laws.

The result of the analysis is a so-called model law, The European Model Company Act (EMCA), which describes the best practice in the most common areas of company law such as company management, general meetings, boards, annual reports, financing and asset management. The model law is presented at a conference in Vienna on 10 and 11 September.

The common recommendations are expected to have a great impact on both the Central European business co-operation and on attracting foreign companies which today face many barriers to entry due to the many different rules in the European countries.

Insufficient rules may contribute to new financial scandals
An example: In several countries, including Germany and Poland, the shareholders’ possibility of asking questions at the companies’ general meetings has been restricted.  This is because shareholders in many countries traditionally have little say at general meetings and is also due to a concern that shareholders of big companies will pose so many questions that general meetings become impossible to handle. But the researchers believe that such restrictions are unnecessary.

“In the Nordic region, it’s never been a problem that shareholders are allowed to pose questions. That’s why we’ve been discussing the notion of transparency in relation to the company’s strategy and management. Shouldn’t shareholders be able to question management salaries, stock options, etc. making it possible to uncover any of those inappropriate incentive schemes which contributed to the financial crisis? We recommend that shareholders should have the right to ask questions, and the Germans also see the sense in this. They are simply used to other another set of rules,” Paul Krüger Andersen explains.

While in Denmark and the “old” EU member states, company laws have been developed over the course of many years, the development is lacking behind in many of the new EU member states such as Hungary and the Baltic countries. That is why Paul Krüger Andersen expects the model law to have the greatest initial impact on the new EU member states. As an example, Hungary has already implemented the recommendations of the model law in relation to the regulation of corporations, and Lithuania also expects to be strongly influenced by the recommendations of the model law.

Strengthening the international competitiveness of the EU
In contrast to the EU Commission’s previous attempts to harmonise the company laws in the EU, the new model law will not be forced upon anyone but serves as a solid and impartial scientific inspiration for the individual member states.

“When the EU member states revise their company laws in the coming years, it will be an obvious choice to consult this comprehensive comparative analysis to see how it’s done in other countries and what pros and cons are involved. So I expect that over time, we’ll see a greater convergence in the company laws of the EU countries. This will lead to greater international competitiveness as the member states will be able to adapt their company laws to changes in economic and social conditions in a faster and less bureaucratic manner,” Paul Krüger Andersen explains.

Surprisingly wide agreement on the recommendations
Despite the wide differences between the countries’ existing company laws there was, according to Paul Krüger Andersen, surprisingly wide agreement on the best practice recommendations which have now been formulated.

“Before embarking on this work, I was convinced that we would have to vote on most of our recommendations. But it hasn’t happened once. Our discussions have almost always ended with everyone seeing sense in the things which we’ve now described in the model law,” Paul Krüger Andersen explains.

 

Further information

Paul Krüger Andersen
Professor of company law and head of the group behind the model law
Department of Law, Aarhus University
Mail: pka@law.au.dk
Tel.: +45 8716 4909
Mobile:  2633 3530 (please send a text message first)

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