Experiments in Comparative Corporate Law: The Recent Italian Reform and the Dubious Virtues of a Market for Rules in the Absence of Effective Regulatory Competition

The article addresses a sweeping Reform of corporate law which was enacted by the Italian government in 2003 and came into effect on January 1, 2004. The new statutory regulation significantly increases freedom of contract in corporate law, relying on the idea that the development of an efficient market for rules will allow the natural selection of the rules that better suit the need of the different stakeholders. Together - and to some extent to compensate for - this greater freedom of contract, new protections for minority shareholders have also been implemented. The reform also imports into the Italian legal system principles and rules originated or developed in other jurisdictions of both common and civil law. The article provides a critical overview of some of the major innovations, focusing on the ones concerning the financial structure of the corporation (new categories of shares, bonds, separate pools of assets, and the like); corporate governance and the protection of minorities. The reform is assessed in the current European regulatory competition scenario, in which the greater flexibility of Italian corporate law might play a significant role

Experiments in Comparative Corporate Law: The Recent Italian Reform and the Dubious Virtues of a Market for Rules in the Absence of Effective Regulatory Competition

The article addresses a sweeping Reform of corporate law which was enacted by the Italian government in 2003 and came into effect on January 1, 2004. The new statutory regulation significantly increases freedom of contract in corporate law, relying on the idea that the development of an efficient market for rules will allow the natural selection of the rules that better suit the need of the different stakeholders. Together - and to some extent to compensate for - this greater freedom of contract, new protections for minority shareholders have also been implemented. The reform also imports into the Italian legal system principles and rules originated or developed in other jurisdictions of both common and civil law. The article provides a critical overview of some of the major innovations, focusing on the ones concerning the financial structure of the corporation (new categories of shares, bonds, separate pools of assets, and the like); corporate governance and the protection of minorities. The reform is assessed in the current European regulatory competition scenario, in which the greater flexibility of Italian corporate law might play a significant role

Takeover Regulation as a Wolf in Sheep\u27s Clothing: Taking U.K Rules to Continental Europe

Aesop was an optimist. In his cautionary fable that inspired the famous admonition about wolves in sheep\u27s clothing, the predator intentionally dons a sheep\u27s fleece in order to sneak up on a lamb. His disguise, it turns out, is so effective that he ends up being mistaken for the real thing and killed by another wolf. According to Aesop, even the most effective fraud can turn against its perpetrator, and justice be done. The results are not always so salutary with other clandestine predators, including legal rules that appear aimed at protecting vulnerable groups, but instead provide valuable tools to be exploited by other, and more powerful, lobbies. The thesis of this Article is that some of the takeover regulations that have proven so successful at protecting minority shareholders in the U.K., and have been incorporated into European takeover regulation, may operate in Continental systems as a deceptive guise that instead ensures protection for entrenched controlling shareholders

Cost-Based and Rules-Based Regulatory Competition: Markets for Corporate Charters in the U.S. and the E.U.

Regulatory competition in corporate law is increasing in Europe and, not differently from what happens in the US, a market for corporate charters is developing in Europe. This article examines the differences between the US corporate law market, and the European one - to the extent that one exists. The basic idea is that, in Europe, there is a stronger competition for the (first) incorporation of rather small, closely-held corporations; while in the US a small closely-held corporation usually incorporates locally, where its shareholders and directors are located, and reincorporates - often in Delaware - when it is growing and, usually, when it goes public. Discussing the possible causes and consequences of this very important, but often overlooked difference, European regulatory competition is described as cost-based, i.e. relying primarily on the costs of incorporation; while US regulatory competition is considered as affecting more directly the rules concerning the internal affairs of the corporation (and directors\u27 powers and liabilities in particular), and takeover regulation

Like Moths to a Flame - International Securities Litigation after Morrison: Correcting the Supreme Court\u27s Transactional Test

Because of the broad jurisdiction American courts have asserted in cases arising under the Securities Exchange Act of 1934, they have been called a Shangri-la for “foreign-cubed” class actions with little connection to the United States. Over the past forty years, the standards used by American courts to determine their jurisdiction in international securities disputes have evolved, culminating in the U.S. Supreme Court’s Morrison decision of 2010. The new transactional test promulgated in Morrison replaced all of its predecessor tests, from a test measuring whether the conduct in question took place in the United States to a test measuring whether the effects of the conduct were felt in the United States, to a combined conduct-effects test. This new transactional test is unsatisfactory, however, because depending on how it is interpreted, it is either too narrow to protect American investors as Congress intended in Section 10(b) of the Securities Exchange Act, or too broad to resolve the ambiguities that plagued the conduct-effects test. This Article proposes a new effects test that will resolve ambiguities, protect American investors, and refrain from asserting American judicial jurisdiction overseas contrary to principles of international comity. Though the effects test would not grant private parties a cause of action against violators operating in the United States but who exclusively defraud those overseas, Congress has already granted authority to federal agencies to pursue such bad actors. The effects test is also in accordance with principles of other important jurisdictions, such as the European Union, and could serve as a basis for an international agreement on jurisdiction in international securities cases

Cost-Based and Rules-Based Regulatory Competition: Markets for Corporate Charters in the U.S. and the E.U.

Regulatory competition in corporate law is increasing in Europe and, not differently from what happens in the US, a market for corporate charters is developing in Europe. This article examines the differences between the US corporate law market, and the European one - to the extent that one exists. The basic idea is that, in Europe, there is a stronger competition for the (first) incorporation of rather small, closely-held corporations; while in the US a small closely-held corporation usually incorporates locally, where its shareholders and directors are located, and reincorporates - often in Delaware - when it is growing and, usually, when it goes public. Discussing the possible causes and consequences of this very important, but often overlooked difference, European regulatory competition is described as cost-based, i.e. relying primarily on the costs of incorporation; while US regulatory competition is considered as affecting more directly the rules concerning the internal affairs of the corporation (and directors\u27 powers and liabilities in particular), and takeover regulation

The Role of Comparative Law in Shaping Corporate Statutory Reforms

This Essay discusses how comparative law played and plays a role in the statutory development of corporate laws. The influence of laws of other systems on the development of statutory law is common, explicit, and represents a tradition that accompanied legal reforms since the very beginning of the development of legislation. Focusing on modern corporate law, I argue (but the argument could be extended to many other legal fields) that it is necessary to distinguish two basic ways in which comparative law influences legal reforms in one particular jurisdiction. The first one is through regulatory competition among different systems. In order to make one system more competitive and attractive, or to remove disadvantages affecting the economic development of one system, legislatures can respond to foreign threats by changing their laws either borrowing rules and institutions from other systems (legal transplants), or by adopting rules designed to protect their interests vis-à-vis the effects of foreign law. The second “channel” through which comparative law plays a role in shaping local rules is a top-down harmonization process. Different reasons can suggest a harmonized regulation of corporate law: the need to create a common market in which all economic actors can operate in a leveled playing-field, the removal of barriers to commerce among states, the desire to reduce regulatory arbitrage, the goal of ensuring to all constituencies of different jurisdictions a similar level of legal protection, and so on. Typically, international agreements can foster harmonization, and the paradigmatic example of this are corporate law (and securities regulation) directives in the European Union, but examples are also present in the U.S.: consider, for example, the Sarbanes-Oxley Act of 2002 that introduced some common rules in the field of corporate governance at the federal level, or the role played by the Model Business Corporation Act. The rules contained in these legal instruments are rarely developed out of the blue. Generally they take into account regulations already existing in one or more jurisdictions, and through a negotiation process tend to extend them also to other systems. In this Essay I will discuss several examples of how comparative law influenced the development of statutory corporate law either through the mechanism of regulatory competition, or through harmonization; both in the U.S. and in the European Union. I will conclude by considering the role of comparative law in corporate law statutory evolution