Company law, Centros and Convergence

Professor Paul Rose of Northwestern Law School has written a thoughtful paper on the possibilities for convergence of company law in the EU after the judgment of the Court of Justice in Case C-212/97 Centros Ltd v Erhvervs- og Selskabsstyrelsen.

In that case, the Court held that it is contrary to Articles 43 (ex article 52) and 48 (ex article 58) EC for a member State to refuse to register a branch of a company formed in accordance with the law of another member State in which it has its registered office but in which it conducts no business where the branch is intended to enable the company in question to carry on its entire business in the State in which that branch is to be created, while avoiding the need to form a company there, thus evading application of the rules governing the formation of companies which, in that State, are more restrictive as regards the paying up of a minimum share capital.

This is what the abstract of Professor Rose's article states:

This paper considers the possibilities for company law convergence in the aftermath of the European Court of Justice's landmark Centros decision. The Centros decision introduces the possibility of regulatory competition among EU Member States for company charters. However, entrenched cultural and political features may dissipate the competitive pressures that would give rise to formal convergence of company law statutes. This paper argues that Member States' statutes are more likely to functionally converge in an effort to effectively compete for new incorporations. This paper also considers the possibility of specialization among EU Member States' statutes. Rather than offering a bundle of corporate goods that attempt to appeal to all businesses seeking to incorporate within a jurisdiction, Member States may attempt to craft their corporate codes and associated regulatory institutions to appeal to certain types of companies or industries.

You can download the article here.