General Principles of EU Corporate and Insolvency Law
Despite the intense effort of the EU to harmonise company law, significant differences persist across Member States. In a working paper, which is about to be published as a book chapter (Ziegler, Neuvonen, Moreno-Lax (eds) Research Handbook on the General Principles of EU Law, Edward Elgar, 2021), I address the question of whether general principles of company law are shared by Member States as a consequence of harmonisation directives. In a similar vein, this paper also asks whether general principles of EU insolvency regimes can be isolated.
Member States’ company law regimes share a core of fundamental features, namely that shareholders are not liable for their company’s debts, that companies have a separate legal personality, and that capital investment is commodified through freely disposable shares. These features, however, do not derive from EU harmonising measures: they rather stem from the spontaneous convergence of Member States’ laws, driven by economic needs shared across economically advanced countries (not only in the EU). Beyond these fundamental features, it is still debated whether harmonising directives have significantly increased the uniformity of Member States’ company regimes. Less debated is the question of whether general principles of company law exist throughout the EU.
By analysing national company law regimes and EU harmonising directives, I conclude that only one such principle can be identified with certainty. This is the principle of unrestricted powers of directors to act on behalf of the company, based upon the German tradition and extended to public companies of all Member States by the First Company law Directive of 1968. In this regard, it is interesting to note that, for many Member States, the First Directive was a step in a piecemeal departure from national rules that offered weak protection to third parties, towards a system in which the interest of the market is paramount. In practice, this directive expanded the German rules on directors’ powers to other Member States. As a result, a principle of unlimited and unlimitable directors’ authority is applied throughout the EU. This principle is sufficiently general, common, and fundamental to be classified as a general principle of EU company law.
Another principle is particularly relevant, namely the duty of equal treatment of shareholders who are in the same condition. This is a general duty that all companies’ bodies should respect when they make decisions that affect shareholders and is mentioned (at least for public companies) by many EU harmonising directives (and is now codified in article 85 of Directive 2017/1132). However, this is not a rigid equality rule, as differentiated treatment might still be justified in the interest of the company; additionally, the Court of Justice of the European Union has explicitly denied that this duty has the status of a general principle of EU law, with the consequence that it only applies within the scope of the specific provisions entailing a rule of equal treatment; furthermore, horizontal relationships among shareholders are excluded (See Case C-338/06 and Case C-101/08). This duty, therefore, can be hardly classified as a true general principle.
Turning our attention to insolvency regimes, we note that it is extremely controversial whether general principles exist within the EU legal order. The reason is that insolvency proceedings are country-specific, as most of their rules have a re-distributive impact on a broad range of stakeholders of the company, such as employees, creditors, and customers. Therefore, insolvency regimes are strictly related to political balances and national social security policies (this is an argument that I have developed in former papers: see here and here).
The only harmonising attempt was related to restructuring and discharge procedures, which were addressed by a non-binding recommendation issued in 2014 (COM (2014) 1500 final) and a directive approved in 2019 (Directive (EU) 2019/1023 on Restructuring Frameworks). The cornerstones of the Directive on Restructuring Frameworks are that debtors in financial difficulty, but not yet insolvent, can avail themselves of restructuring and workout proceedings and that national authorities should order a general stay of individual enforcement actions. However, a complex number of carve-outs and exceptions are also included and many crucial issues are still in Member States’ competence, such as defining creditors’ ranking and priorities, and the very notions of ‘insolvency’ and ‘likelihood of insolvency’.
The only common denominator of insolvency regimes across Member States seems to be the duty to treat creditors equally and respect pre-insolvency entitlement and creditor ranking (pari passu or par condicio creditorum). Nevertheless, at national level there is also an intricate web of exceptions to this principle, which vary across jurisdictions and aim at protecting specific classes of creditors. The situation, therefore, is still in flux and does not seem to be yet settled for us to firmly distil specific general principles of EU insolvency law.
Federico M. Mucciarelli is full professor at the department of economics ‘Marco Biagi’, University of Modena and Reggio Emilia.
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