Aspects Of Corporate Law and Insolvency Within the European Community

The European Community Aiming to Create an Integrated Sigle Market in the area of Companies

The European Community aiming to create an integrated single market in the area of companies started harmonizing the Company law through Treaties and Directives. Particularly, this aim was purported to be achieved by allowing and facilitating the Freedom of Establishment (FoE) in respect of companies. It has been said that what makes the right to FoE so important for companies is that it gives to the incorporators the capacity to choose freely between various company law regimes and enables them to go for the form and regulatory environment that is the most suitable for their needs. However, as will be understood throughout the essay the enjoyment of the right to FoE will be subject to various restrictions imposed by the law of the Member States (MS) which apply to the formation of each company (Co). Each MS may have a different view on how the companies may be transferred form one MS to another, therefore on how they will be benefited from the right and this will obviously create an inconsistency in the exercise of the right of FoE.

Coming to the area of Insolvency law and the right of companies for cross border mobility, things are even more difficult comparing with Company law. Although corporate entities, within the scope of the FoE right and the concept of cross-border movements in Europe, are supposed to go ‘forum shopping’ in order to benefit from another insolvency law regime things are not so simple since there is no harmonisation in relation to insolvency law of the member states. Instead the European Union (EU) provides for an instrument that deals exclusively with the issue of insolvency namely the European Insolvency Regulation (EIR). EIR generally impedes the enjoyment of the FoE right as it generally provides that forum shopping should be avoided in order to have proper functioning of the internal market.

 

 

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