Seat theory versus incorporation theory E-Book

Manuela Schweizer

• Herausgeber: GRIN Verlag
• Kategorie: Geisteswissenschaft
• Sprache: Englisch
• Veröffentlichungsjahr: 2008

Beschreibung

Research Paper (undergraduate) from the year 2007 in the subject Business economics - Law, grade: 1,2, Heilbronn University of Applied Sciences (Business School Heilbronn (MBA)), course: The governmental and legal environment of business, language: English, abstract: This report is about the European Court of Justice’s jurisdiction and its implications on German Corporate Law: It explores how European Law is influencing and thereby changing national Corporate Law. In doing so, the author analyses the impact of the ECJ’s rulings in the cases Daily Mail, Centros, Überseering as well as Inspire Art and their effect on the – until recently in continental Europe prevailing – seat theory. Furthermore, the author carefully analyses the subsequent developments in Germany, with a particular focus on the trend to form a British Limited instead of a German GmbH as well as the thus resulting reform of German Limited Liability Company Act (GmbHG). Finally, the new competition of legal forms is evaluated by balancing the arguments in favour and/or against this development. Keywords seat theory, Sitztheorie, incorporation theory, Gründungstheorie, Daily Mail, Centros, Überseering, Inspire Art, race to the bottom, race for laxity, Limited, SE, Limited Liability Company Act, GmbHG

Leseprobe

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Table of Contents

Table of Contents

List of abbreviations

1. Abstract

2. Introduction

3. Seat theory versus incorporation theory: An analysis of the ECJ’s jurisdiction and its implications

3.1. Analysis of the implications of the ECJ’s jurisdiction on German Corporate Law, with particular focus on the application of the seat theory

3.1.1. Issue

3.1.2. Definitions

3.1.2.1. Seat theory

3.1.2.2. Incorporation theory

3.1.3. Legal foundations: The relationship between European Law and National Law

3.1.4. The implications of the ECJ’s jurisdiction on National Law

3.1.5. The impact of the ECJ cases Daily Mail, Centros, Überseering and Inspire Art

3.1.5.1. Daily Mail (1988)

3.1.5.2. Centros (1999)

3.1.5.3. Überseering (2002)

3.1.5.4. Inspire Art (2003)

3.1.5.5. Other relevant cases

3.1.6. Consequences regarding the application of the seat theory

3.2. Analysis of the effects of this ECJ jurisdiction on the use of foreign legal forms in Germany and German GmbHs

3.2.1. Threat: Race to the bottom

3.2.2. Trend: Formation of a British Limited in Germany

3.2.2.1. Capital

3.2.2.2. Piercing the corporate veil (“Durchgriffshaftung”)

3.2.2.3. Costs

3.2.2.4. Findings

3.2.3. Consequences: MoMiG – Reform of the German GmbHG

3.2.3.1. Introduction

3.2.3.2. Contents

3.2.3.3. Findings

3.3. Advantages and disadvantages of this newly created competition of legal forms within the European Union

3.3.1. Advantages

3.3.2. Disadvantages

3.3.3. Findings

4. Conclusion / Prospects

5. Appendix

5.1. Appendix 1 – foreign legal forms

Public companies and limited liability companies

5.2. Appendix 2 – Articles applied

Consolidated Version of the Treaty establishing the European Community (EGV)

6. References

List of abbreviations

1. Abstract

This report is about the European Court of Justice’s jurisdiction and its implications on

German Corporate Law:  It explores how European Law is influencing and thereby changing national Corporate Law.  In doing so, the author analyses the impact of the ECJ’s rulings in the cases Daily Mail, Centros, Überseering as well as Inspire Art and their effect on the – until recently in continental Europe prevailing – seat theory.  Furthermore, the author carefully analyses the subsequent developments in Germany, with a particular focus on the trend to form a British Limited instead of a German GmbH as well as the thus resulting reform of German Limited Liability Company Act (GmbHG).  Finally, the new competition of legal forms is evaluated by balancing the arguments in favour and/or against this development.

Keywords

seat theory, Sitztheorie, incorporation theory, Gründungstheorie, Daily Mail, Centros, Überseering, Inspire Art, race to the bottom, race for laxity, Limited, SE, Limited Liability Company Act, GmbHG

2. Introduction

 “Thank you, all your properties have just been assigned to the Queen’s estate.”

The German businessman still could not believe what had just happened.  When forming a British Limited in Germany, he was convinced that this was the least expensive option to set up a firm – with a registered share capital of just one British pound, instead of the EUR 25,000 that were required to form a German GmbH at that time.  He was not aware that he could be made liable for not following the publication requirements in the UK, which leads to cancellation in the trade register and loss of the legal capacity.  This, in turn, implies that the company’s British estate devolves to the British Crown and the previous managing directors can even be made liable personally.[1]  Despite forming a British Limited has become very popular in Germany, as is shown by the increasing number of registrations, many company’s founders seem not to be aware of the responsibilities and risks attached to this foreign legal form.  How come that German entrepreneurs set up a British Limited?

Prior to analysing the use of foreign legal forms such as the British Limited and the thus resulting changes in German GmbHG, the author analyses the underlying legal framework. 

First, he outlines the ECJ’s recent jurisdictions regarding the application of the seat theory versus the incorporation theory, referring to the cases Daily Mail, Centros, Überseering and Inspire Art.  Thereafter, he explains how the ECJ’s jurisdiction influences and changes national law and discusses whether there is still room for an application of the so-called seat theory in Germany.  Subsequently, he analyses the effects on the use of foreign legal forms in Germany, with a particular focus on British Limiteds, and explores the German legislator’s reaction by reforming the GmbH.  The author concludes with the consideration of advantages and disadvantages of this newly created competition of legal forms.

3. Seat theory versus incorporation theory: An analysis of the ECJ’s jurisdiction and its implications

The main part of this report is divided in three sub-categories, (1) implications on German Corporate Law and the application of the seat theory, (2) effects on the use of foreign legal forms such as the British Limited and reform of the German GmbHG as well as (3) careful consideration of the advantages and disadvantages of this newly created competition of legal forms.

3.1. Analysis of the implications of the ECJ’s jurisdiction on German Corporate Law, with particular focus on the application of the seat theory

This section focuses on the analysis of the European Court of Justice’s jurisdiction and its implications on German Corporate Law, considering the ECJ-cases Daily Mail, Centros, Überseering and Inspire Art.  The author explains how the ECJ’s jurisdiction influences and changes National Law and explores whether there is still room for an application of the so-called seat theory under German Law.