Incorporating under European Law: The Societas Europaea as a Vehicle for Legal Arbitrage

33 Pages Posted: 15 Dec 2008

See all articles by Horst Eidenmueller

Horst Eidenmueller

University of Oxford - Faculty of Law; European Corporate Governance Institute (ECGI)

Lars Hornuf

Technische Universität Dresden; CESifo (Center for Economic Studies and Ifo Institute)

Andreas Engert

Freie Universität Berlin, Department of Law; European Corporate Governance Institute (ECGI)

Date Written: December 15, 2008

Abstract

After a slow start, the European Company (Societas Europaea, SE) has become increasingly popular. Beside documenting the growth of this new company type, we examine whether firms choose to incorporate in the SE corporate form because they engage in 'legal arbitrage' by exploiting differences in legal rules between jurisdictions. We specify a number of hypotheses on particular legal arbitrage motives. To validate our hypotheses, we use a broad telephone survey among SE users in Germany as well as a simple country-level regression model based on a unique, hand-collected dataset on SE incorporations. We find strong evidence that firms use the SE to mitigate the effect of mandatory co-determination rules. Establishing a one-tier board structure (in jurisdictions that impose a two-tier structure on their national public companies) and taking advantage of the SE's mobility for tax purposes also seem to be driving SE formations. By contrast, our analysis fails to support the suggestion that firms use the SE to shop for the most favourable national company law to fill the gaps in the SE Regulation.

Keywords: legal arbitrage, regulatory arbitrage, regulatory competition, charter competition, Societas Europaea, European Company, EC company law, incorporation

JEL Classification: G34, G38, K22

Suggested Citation

Eidenmueller, Horst G. M. and Hornuf, Lars and Engert, Andreas, Incorporating under European Law: The Societas Europaea as a Vehicle for Legal Arbitrage (December 15, 2008). Available at SSRN: https://ssrn.com/abstract=1316430 or http://dx.doi.org/10.2139/ssrn.1316430

Horst G. M. Eidenmueller

University of Oxford - Faculty of Law ( email )

St Cross Building
St Cross Road
Oxford, OX1 3UL
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Lars Hornuf

Technische Universität Dresden ( email )

Dresden, 01307
Germany

HOME PAGE: http://www.hornuf.com

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Andreas Engert (Contact Author)

Freie Universität Berlin, Department of Law ( email )

Boltzmannstr. 3
Berlin, 14195
Germany

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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