Common Features. Although there is not at this time any uniform, pan-European substantive law of corporations (or "company law" as it is also called), all European countries have extensive (and fairly similar) provisions under their own local laws for most types of businesses to be operated in a variety of corporate forms. These accomplish the main corporate objectives of providing limited liability (the corporation can only lose what it has), providing personal immunity from liability for shareholders, officers and directors (except in extreme cases of fraud or criminality or if the business is conducted while insolvent) and providing a well-established balance whereby efficient management of the business can be accomplished without undue interference by shareholders, employees or creditors (while still providing reasonable safeguards for their rights and their sometimes competing interests).

The principal dividing characteristics, in assessing these various forms of the corporate entity, correspond generally to the different approaches, on the one hand, of common law jurisdictions (such as England, Scotland, Wales) and of the continental or civil law code jurisdictions, on the other hand (most of the other European countries). In practice, the differences are more of appearance and form and "mechanics", than of substance.

All European systems of corporation law establish rules for the formation of the company as a separate legal entity or juridical "person", for the choice of a specific corporate name, for the scope of permissible corporate business, for the liability of the owners to be limited (under certain conditions), for the management to be conducted by persons who need not be owners, and for third parties to have reasonable safeguards when extending credit to the corporate entity. Rules are also set out for changing the foregoing features (within certain limits) and for closing down the business in an orderly fashion (winding up, dissolution, liquidation, insolvency, bankruptcy). There are rules about the types, authorised number and nominal values of shares and are also rules about a registered place of business ("siege social" in France, "Firmensitz" in Germany, "kantoor" or "maatschappelijke zetel" in Holland, "domicilio social" in Spain, and so on).

In common law jurisdictions, there is generally some latitude for the founders (owners) to establish by private agreement some of the rules by which they wish the internal affairs and management of the corporation to be governed (usually these rules are set forth in the "Memorandum of Association" (a publicly filed document) or in separate bylaws and shareholder agreements, usually not reflected in any public document). Similar flexibility exists under the continental systems but more adherence to the statutory models tends to be the norm (with the main internal rules being set forth either in the company "statutes" (original incorporation documents) or in other documentation lodged with some governmental office or third party, such as a notary. Over a period of years, the practical differences between the two regimes (common and civil law) have tended to become more insubstantial, although some regional formalities have tended to fade away more slowly (Switzerland, Greece, Finland).

Corporations which are set up under the common law system are usually managed on behalf of the shareholders by persons elected annually (or more often) by the shareholders at formal meetings (usually called Annual

General Meetings or Extraordinary Meetings). The persons so elected (or appointed) normally carry the title of Director or Manager or Managing Director or (increasingly) may be known by the internationally recognised American terminology (CEO, CFO, COO).

In the continental systems, these corporate positions have readily identifiable counterparts (with the English terms "manager" and "director" being widely used or recognised) and a similar election/appointment process exists. Some European countries, such as Germany, may also provide a different or additional level or layer of corporate management or oversight. Thus, German corporations of certain types must have one level of managers who manage the day-to-day business and another level above them who appoint and manage the managers (the "Aufsichtsrat", literally the supervisory board or council). In some countries, these additional layers or interfaces may also include statutorily designated employee groups (mandatory workers' councils).

Formalities. In common law jurisdictions, the formalities to achieve the initial formation of the corporation tend to be minimal (as do the formalities thereafter related to the actual running of the business, changes in share ownership and changes in management). Initially, the would-be founders or incorporators fill in some fairly standard forms provided by the government, pay some fees, have the entity registered and then are ready to conduct business. All these steps can be accomplished without recourse to a specialist advisor or officially designated intermediary or expert whose approval is required.

In the continental systems, by contrast (and which includes the vast majority of European national systems), there can be a variety of formalities, which will include the necessity to have the documents prepared by, or approved by, a specialist ("Notar" in Germany and Austria). The documents must be signed in the presence of the notary (who can explain their legal meaning and will then affix seals and other badges of officialdom and approval). In most European countries, the documents are not only registered with some government agency (sometimes only locally, sometimes nationally, such as with a commercial registry, ministry or a court) but are also "gazetted" (that is, published in some newspaper or other officially approved means of publication).

Some continental countries take these steps somewhat farther. In Italy, for example, the law includes a requirement that a local Italian court also must ratify what the incorporators have established, even if the "notaio" has given the green light to the paperwork.

As for the actual running of the business, there are a number of events which, for a continental corporation, may trigger a necessity to return to the notary and have new documents procotolised, registered and gazetted. In practice, the system works smoothly and efficiently despite the apparent need for rather more paperwork than under the common law system. On the other hand, these additional civil law formalities may fairly be viewed as a safeguard for shareholders, employees and creditors and they are, indeed, the predominant system in terms of numbers of corporations in Europe (in France, alone, for example, there are currently (June 2003) more than 3 million registered French corporations conducting business).

Structures. All European countries have rules about minimal corporate capitalisation; about whether (or how many) directors or officers or managers need to be citizens and/or resident in the jurisdiction of incorporation; about what corporate and other information must be listed on the company's letterhead; about what languages are mandatory or permissible for the maintenance of corporate and other business records. All European countries have special, additional rules when the business involves banking, insurance, financial advice and other specified industry sectors. As a general rule, foreigners and nationals stand on an equal footing with respect to the ownership and management of any corporation established under the laws of any EU member country. There are exceptions for certain specialised industries and local geographic regions.

All European countries offer a fairly wide variety of different types and species of the corporate form: the private limited company, the public limited company, the limited liability partnership (a "quasi-corporation" in some respects) and so forth (a few countries have special corporations for foreign subsidiaries, usually designated by the word "filial" somewhere in their name). In France, there is a special type of streamlined corporation ("SAS" for short - "Societe par Actions Simplified") which is specifically designed to be more flexible than other corporate formats.

Most corporate business in Europe, however, is carried out either (i) by the private limited liability company (so called in the UK and with a similar counterpart in France, Germany, Italy, etc.) or (ii) by the public limited liability company (pic in the UK, AG in Germany, etc.). It is usually quite easy to recognise what kind of corporation one is dealing with by the word or abbreviation at the end of its name. The smaller, private limited companies usually have the abbreviation "Ltd." in the common law countries. In civil law countries they have abbreviations like "s.a.r.l." (France), "GmbH" (Germany), "AB" ("Aktiebolag") in Sweden, "A/S" ("Aksjeselskap") in Norway, "Oy" ("Osakeyhtio") in Finland and "AE" ("anonymos eteria") in Greece). The larger type corporations usually have indications such as "pic" (UK) or "AG" (Germany) or "S.A." (France, Italy) in their names and the limited liability partnerships often have the word "commandite" or "Kommandit" somewhere in their names or abbreviations ("KG", in Germany, for instance, and "KB" in Denmark, "K/S" in Norway, "Ky" in Finland and "Spojka komandytowa" in Poland but "EE" ("eterorythmos eteria") in Greece. In Hungary, the most common form of limited liability company is the "Kft" ("Korlatolt felelossegti tarsasag") and other familiar European corporate formats are also available.

Various types of shares (ownership interests and participations) may also be available under the corporate laws of all European countries, ranging from "ordinary" shares (which have a vote and a right to share in dividends) to "preference" shares (which may have a preferred right to dividends or to corporate assets). Some European corporations (such as the German GmbH) have no share certificates as such (the rights of the owners are reflected in the documents officially protocolised by the notary in the Commercial or Corporations Registry and via which all transfers must be effectuated anyway (making "shares" superfluous, as well as inconsistent with the statutory regime designed for this type of corporation).

In essence, the private limited companies can have a lower capitalisation and can operate with fewer formalities and mandatory outside audit duties than is the case for public limited companies.

EU Directives. Despite some individual corporate law divergencies from European country to country, those that are already members of the EU may be affected by the fact that the EU does issue various corporate Directives for implementation throughout the union, whose general substance is (or will be) uniform, in time. Examples of such Directives which have been issued are Directive 89/667/EEC (on single-member private limited liability companies), Directive 84/253/EEC (on certain types of statutory corporate audit personnel) and Directive 77/91/EEC (on certain aspects of public limited company formation). Other relevant Directives (some relating to accounting issues) can be found at the Chart on pages 90-97.

Cross-Border Movements. There is currently no widespread European practice or tendency for a corporation to be set up in country A for the express purpose of mainly doing business outside of country A. Corporate business is mainly conducted in Europe (1) by corporate entities set up under the national laws of the country in which they principally do business and (2) via locally incorporated subsidiaries in other countries.

Court cases testing the right of a corporation from country A to do business in country B (without having to be a mirror-image of a B-country corporation) are still rather scarce but this is very likely to change. In 1999, a UK-Danish case (Centros Ltd. v Erhvervs- og Selskabsstyrehen, Case C-212/97, decided 9 March 1999 [1999] ECR 1-1459) was a strong pre-indication of the way in which European law was developing on this subject. In essence, Centros involved the formal request by an English private limited company with a capital of a mere ?100 to set up and do business in Denmark (minimal required Danish company capital at the time was more than the equivalent of ?11,000). In its decision, the ECJ ruled that a corporation is a "person" and hence the EU doctrines about freedom of movement apply and may outweigh local restrictions.

In the more recent German-Dutch case of Oberseering BV v. Nordic Construction Company Management GmbH (Case C-208/00, decided 11 May 2002), the ECJ took this concept farther, leading to a reasonable expectation that in due course all EU member country barriers to cross-border corporate establishment and operation will disappear with respect to most corporate business issues.

Other issues, including corporate governance. Mergers of European corporations tend to involve asset or share acquisitions and thus are affected by issues, among others, involving contracts and antitrust and employment matters. Please see the Chapters on "Contracts", on "Employment" and on "Antitrust/Competition". j

The class action, the derivative lawsuit, the ultra vires doctrine (and other veil-piercing theories) have little application under the corporate laws of any European country. The business doctrine rule is alive and well and business decisions taken by management in good faith are quite difficult to challenge successfully. Stated another way, the issue of corporate directors' risks is in its infancy in Europe.

There is, meanwhile, an increasing tendency for the individual European countries to adopt laws and regulations involving permissible, conditionally permissible and forbidden business dealings (self-dealing) between managers and their corporate employers. An example would be the French "conventions reglementees" (specifying some private business transactions that French corporate managers and directors may permissibly do with their employer).

The enactment and implementation in the USA of the Sarbanes-Oxley Act of 2002, regarding (among other things) officer/ director certifications of corporate financial statements (and the duties of in-house counsel with respect thereto), have been carefully noted in Europe. There is not at this stage any precise pan-European or even local equivalent in most European countries, although some EU member countries (e.g., Germany) hava had somewhat similar requirements for quite a few years (directors` mandatory “Vollstandigkeitserklarung”(solemn declaration of accuracy and completeness), appended to certain financial statements). The German Federal Government introduced its first code on corporate governance in early 2002, to replace variety of regulations on the subject. In the UK, a recent major review of corporation law has resulted in various recommendations for improved disclosure of corporate information and additional regulations on the topic of directors` remuneration have been introduced which will have impact upon UK listed companies with FYEs after 2002.

New rules of \corporate governance are being examined and adopted in many European countries. The Higgs report in the UK (January 2003) and the second Vienot Report in France (July 1999) are representative examples of informal codes of [corporate conduct and best practices which need to be taken into account by corporate enterprises, pending specific EU and national legislation on the subject.

Interestin Europe – facts: + Norway is the only country to have agreed to join the EU and then withdraw.

+Charlemange is the name of the EU administrative building at 170 Rue de la Loi, Brussels, and is usually referred to by that name. other EU buildings well known by name are Berlaymont (home of the European Commission) and Justus Lipsius (home of the council of the EU).

+ In Germany and Austria, the “Chancellor” (Kanzler) is the head of the government. In the UK, the Chancellor of the Exchequer is the chief finance minister and the Lord Chancellor is the chief legal officer in England and is also the speaker in the House of Lords.

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