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– 357 – The European Union’s Involvement in Company Law and Corporate Governance Jaap Winter1 Introduction It was an honour to speak at the special commemoration of Professor Jan Ronse on the occasion of the conference on the European Company Action Plan of 2003 organised by the Jan Ronse Institute, chaired by Professor Walter van Gerven and in the presence of former Minister of Justice Van Deurzen and of the Ronse family. This contribution is a reflection of my presentation. Part I addresses the EU’s involvement in company law and its evolution. Part II deals with its more recent involvement in corporate governance. Part I. The EU and Company Law 1. Treaty and harmonisation The basis of the EU’s involvement in company law is the freedom of establishment, an element of the free movement of persons. This freedom includes “the right to take up and pursue activities as self-employed persons and to set up and manage undertakings, in particular companies or firms…, under the conditions laid down for its own nationals by the law of the country where such establishment is effected, subject to the provisions of the Chapter on capital” (Article 43 Treaty of Rome). In order to attain freedom of establishment, the Council and the Commission are required to “co-ordinate to the necessary extent the safeguards which, for the protection of the interests of members and others, are required by Member States of companies or firms …, with a view to making such safeguards equivalent throughout the Community” (Article 44(2)(g)). This Treaty provision is the basis for the harmonisation of company law in the European Union. It is a rather peculiar basis. It takes a specific angle to the harmonisation process: the protection of shareholders and 1 Professor of Company Law at the University of Amsterdam, Acting Dean of the Duisenberg School of Finance, former Chairman of the High Level Group of Company Law Experts of the European Commission. The first part of this contribution is derived from my article in the Liber Amicorum for Eddy Wymeersch, Perspectives in Company Law and Financial Regulation, published in 2009 after the Leuven Conference was held, see pp. 43-60. – 358 – others which is required by Member States’ company laws. The protection of shareholders and others, in particular creditors, was very much in the minds of the original authors of the Treaty. There was a concern among Member States in those days, we speak of 1957, that shareholders and creditors would not invest in companies from other Member States or do business with them, as they would not be familiar with the company laws to which such companies would be subject and particularly with the protections afforded to them under these company laws. In addition, Member States feared that without a rigorous harmonisation programme, Member States would race to the bottom by creating company laws with ever reducing protection for shareholders and creditors in order to compete with other Member States for the incorporation or registration of companies in their jurisdictions. The Netherlands was seen as Europe’s bottom in those days, not only geographically but also in terms of company law. Dutch company law was very flexible, with a minimum of mandatory rules. Regulatory arbitrage that would lead other Member States to race to that same bottom was to be avoided. I will not go into the question whether such a race to the bottom would have ever occurred without Article 44(2)(g) and the harmonisation programme. For now I just note that approaching company law legislation with the primary objective of making protections for shareholders and creditors equivalent across the EU is indeed a peculiar approach to company law. On the basis of Article 44(2)(g), eleven Directives have been adopted in the meantime. They primarily deal with formalities of company law such as incorporation, publicity, capital formation and protection, (cross-border) legal mergers and split-ups, accounting, branches, etc. Some call the resulting EU company law trivial.2 Member States have discovered fundamental differences of opinion on such core issues as the organisation of the board, the role and rights of shareholders, group relationships, employee co-determination and corporate control. In these areas, nothing of substance has been agreed by Member States; projects were either abandoned (the Fifth Directive on the structure of the company dealing with board structures and the rights of shareholders, and the Ninth Directive on group law) or Member States have agreed to disagree and to leave it...

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