Companies in private international law

Abstract

The world is getting globalized and more connected than ever. Business is being done internationally, contracts are closed between legal subjects from different countries and international companies represent powerful market forces. Changed situation brings new challenges for the legal regulation of such phenomena. International private law deals with legal issues connected to different laws and determines the applicable law. There are two diverging theories concerning applicable company law, the real seat doctrine and the incorporation doctrine. The real seat theory requires a company to be subject to the law of the state in which its effective centre of administration is located. The real seat doctrine is considered protective, because it safeguards the rights of stakeholders such as minority shareholders and creditors. If a company changes its centre of business, if it moves its decisive activities to another country, the applicable law will change. Consequence of the change is that the state applying the real seat principle does not recognize legal capacity of such a company. The incorporation theory determines the applicable law by reference to the state in which the company was established or registered. It is assumed that incorporation theory leads to the race to bottom in company law. I..