!Корпоративное право 2023-2024 / 2013-study-analysis_en

CONTRIBUTORS

Authors	Dr Carsten Gerner-Beuerle	Mr Edmund Schuster
of the Study	Lecturer in Corporate Law	Lecturer in Corporate Law
	London School of Economics	London School of Economics
	Dr Philipp Paech
	Lecturer in Financial Law and
	Regulation
	London School of Economics
Steering	Prof David Kershaw	Prof Martin Winner
Committee	London School of Economics	Vienna University of Economics and
		Business
	Professor Federico Mucciarelli	Professor Isabel Sáez Lacave
	Associate Professor of	Associate Professor of commercial and
	Business Law	corporate law
	University of Modena and Reggio	Universidad Autónoma of Madrid
	Emilia
	Dr Romana Cierpial	Prof Pierre-Henri Conac
	Lecturer in law	Professor of Commercial Law
	Research Institute for Central and	University of Luxembourg
	Eastern European Business Law
	Vienna University of Economics and
	Business
Country researchers
and reviewers
Austria	Mag. Nora Frizberg LLM	Prof Martin Winner
	Research Assistant	Vienna University of Economics and
	London School of Economics	Business
	Dr Wendelin Ettmayer LLM
	Attorney
	Baker & McKenzie Vienna
Belgium	Mr Joris Latui, LLM	Prof Eddy Wymeersch
	Research Assistant	University of Gent
	London School of Economics
		Jan Ronse
		Institute for Company Law
		KU Leuven
Bulgaria	Mr Georgi Valentinov Georgiev	Prof Polya Nedeltcheva Goleva-Panova
	Research Assistant	Institute for State and Law
	London School of Economics	Bulgarian Academy of Sciences
		New Bulgarian University
	Ms Maria Todorof
	Research Assistant
	London School of Economics

xix Directors’ Duties and Liability in the EU

Croatia	Mr Antun Bilić	Prof Siniša Petrović
	Research Assistant	Faculty of Law
	Faculty of Law	University of Zagreb
	University of Zagreb
Cyprus	Ms Eleni Papasozomenou, LLM	Mr Loukis Pappaphilippou
	Advocate	Advocate
	PhD candidate, Kings College	Head of Chambers
	London	Mr. Pantelis Christofides
	Research Assistant	Advocate, LLM, ACIArb
	London School of Economics	Partner
		L. PAPAPHILIPPOU & CO LLC
		Advocates & Legal Consultants
		Nicosia
Czech Republic	JUDr Jana Smlsalová	Prof JUDr Jarmila Pokorná, CSc
	Research Assistant	Faculty of Law
	London School of Economics	Masaryk University
Denmark	Ms Sabrina Mai Bendjazia, LLM	Prof Jesper Lau Hansen
	Research Assistant	University of Copenhagen
	London School of Economics
Estonia	Ms Nele Laidvee, LLM	Dr Andres Vutt
	Advocate, Legal Counsel	Associate Professor
	Statoil Fuel & Retail AS	of Commercial Law
	Tallin	University of Tartu
Finland	Ms Mervi Barth	Ms Leena Linnainmaa, LLM
	Research Assistant	Deputy Director General
	London School of Economics	Chamber of Commerce, Finland
France	Ms Cecilia Dervogne	Prof Pierre-Henri Conac
	Research Assistant	University of Luxembourg
	London School of Economics
Germany	Dr. iur. Verena Klappstein MA LLM	Dr Carsten Gerner-Beuerle
	Research Assistant	Lecturer in Corporate Law
	Philipps-University of Marburg	London School of Economics
	Research assistant
	London School of Economics
	Niklas Bielefeld
	Research assistant
	London School of Economics
Greece	Ms Nikoletta-Izampella Tsirmpa,	Prof Evanghelos Perakis
	LLM, Advocate	University of Athens
	Research Assistant
	London School of Economics
	Ms Angeliki Cheimona
	Research Assistant
	London School of Economics
Hungary	Prof Attila Menyhárd	Prof András Kisfaludi
	Eötvös Loránd University	Eötvös Loránd University
	Budapest	Budapest
Ireland	Mr Edmund Shanahan	Prof Deirdre Ahern
	Research Assistant	Trinity College
	Trinity College	Dublin
	Dublin

xx Directors’ Duties and Liability in the EU

Italy	Dr Matteo A. Solinas	Prof Federico Mucciarelli
	Lecturer in Corporate and Financial	University of London, Soas, DeFIMS,
	Law	and University of Modena and Reggio
	University of Glasgow	Emilia, Department of Economics
Latvia	Ms Zane Paeglīte, LLM	Dr Kaspars Balodis
	Associate	Associate Professor
	Law Firm SORAINEN	University of Latvia
	Riga	Riga
Lithuania	Mr Eugenijus Filonovas	Dr Rimgaudas Greičius
	Senior Associate	Lawyer
	Law Firm SORAINEN	Court of Justice of the EU
	Vilnius	Luxembourg
Luxembourg	Ms Emmanuelle Mousel, LLM	Prof Pierre-Henri Conac
	Junior Associate	University of Luxembourg
	Arendt & Medernach
	Luxembourg
Malta	Dr Ylenia Grech	Prof Andrew Muscat
	Dip. Not. Pub., LLD, LLM	University of Malta
	Advocate	Partner, Mamo TCV Advocates
	Sliema, Malta	Valletta
Netherlands	Mr Sybren de Beurs, LLM	Prof Steef Bartman
	Advocate	Leiden University
	NautaDutilh N.V.	Of Counsel, DLA Piper NV, Amsterdam
	Amsterdam
Poland	Ms Olga Horwath, LLM	Dr. Romana Cierpial
	Research Assistant	Research Institute for CEE Legal
	London School of Economics	Studies, Vienna University of
		Economics and Business
Portugal	Ms Ana Teixeira, LLM	Prof José Engrácia Antunes
	Research Assistant	Universidade Católica Portuguesa
	London School of Economics	Porto
	Advocate
	Serra Lopes, Cortes Martins
	Advogados
Romania	Ms Iulia Muresan	Prof Radu Catană
	Research Assistant	Universitatea Babeş-Bolyai
	London School of Economics	Cluj-Napoca
Slovakia	Dr. Veronika Užáková &	Prof. Dr. Mária Patakyová, PhD
	Mgr. Ivan Kisely	Department of Commercial, Financial
	Department of Commercial,	and Economic Law
	Financial and Economic Law	Comenius University
	Comenius University	Bratislava
	Bratislava
Slovenia	Mr Mitja Siraj, LLM	Prof Rado Bohinc
	Research Assistant	Faculty of Social Sciences
	London School of Economics	University of Ljubljana
		Faculty of Management
		University of Primorska
Spain	Mr Juan Carlos Gonzáles	Prof Isabel Sáez Lacave
	Fernández, LLM	Associate Professor of commercial and
	Research Assistant	corporate law
	London School of Economics	Universidad Autónoma of Madrid

xxi Directors’ Duties and Liability in the EU

Sweden	Ms Helene Eriksson, LLM	Mr Rolf Skog
	Research Assistant	Executive Director
	London School of Economics	Swedish Securities Council
	Ms Daniela Hallvar	Mr Jon Syvertsen
	Research Assistant	Research Assistant
	London School of Economics	London School of Economics
United Kingdom	Ms Mairead Moore	Prof David Kershaw
	Research Assistant	London School of Economics
	London School of Economics
Project	Ms Nikoletta-Izampella Tsirmpa
Coordinator	LLM, Advocate
	Research Assistant
	London School of Economics
Editorial	Ms Madhavi Ligam, LLM
Coordinator	Research Assistant
Country Reports	London School of Economics
LSE Enterprise	Elisa Narminio	Rehanna Neky
Project management	Project Manager	Marketing and Communications
team	LSE Enterprise Ltd.	Manager, LSE Enterprise Ltd.
	Mike Denison
	Project Officer
	LSE Enterprise Ltd.

xxii Directors’ Duties and Liability in the EU

INTRODUCTION

The European Commission DG Internal Market and Services has commissioned the three authors of

The London School of Economics and Political Science to undertake a study on directors’ duties and liability across the EU. Work on the study commenced mid-January 2012 and ended 15 December 2012. The work basically consists of two strands, notably the relevant research in 28 jurisdictions (EU27 plus Croatia2) on the one hand, and the comparative analytical work on the other hand.

In performing the task of local research in the 28 jurisdictions, in a first phase of the work, the three authors drew on a Europe-wide network of more than 60 local research assistants and renowned company law experts.3

During the second phase of the work, the comparative-analytical part was developed in-house at LSE with additional input by a steering group of eminent experts and supplementary fact finding in the Member States where needed.

The process of producing the 28 ‘country reports’ and the comparative analytical part is described in greater detail in the section on methodology below.

Overview

The structure of the finalised study is as follows.

In this introductory part, the purpose of the study, history of the Commission’s work on directors’ duties, the scope of the study and the main methodological elements employed in preparing the study are presented. Further, it sets out a number of difficulties we encountered in preparing it.

The comparative-analytical part is the core of this study, as it summarises as well as analyses the information gathered by us in the first phase of the project. Seven topics are covered:

The organisation and structure of boards, covering the choice between one tier and two tier structures, the roles of employee representatives and the appointment and dismissal process.

The substantive provisions on directors’ duties. This is the main part of the analysis, comprising the issues of who owes the duties and to whom; which are the interests of the company; and the content of the duty of care and the duty of loyalty. Further, it describes the type of liability flowing from breaches of the duties, and limitations to the liability.

Questions of enforcement, i.e. who has the standing to sue and whether a derivative action is possible.

Duties in the vicinity of insolvency, in particular to file for insolvency and the prohibition to engage in wrongful trading. Further, whether there are other changes to directors’ duties in the vicinity of insolvency, and whether there is a duty to recapitalise or a mere duty to call a meeting.

Cross-border issues, notably the influence of the real seat or the incorporation theories on the law applicable to directors’ duties.

For each of these topics, we first identify the main legal strategies used throughout the Member States to address the common practical problems in the respective sphere. We then “map” the regulatory approaches in the areas we identified as most relevant, in order to provide an overview of the legal landscape throughout Europe. In the subsequent analysis we take a functional approach, comparing

2For ease of reference hereinafter simply referred to as ‘Member States’ or ’28 jurisdictions’.

3The list of all contributors is set out on pp. v et seq.

xxiiiDirectors’ Duties and Liability in the EU

different legal strategies based on their intended purposes and their function within a given jurisdiction, rather than focussing on similar legal techniques. We then discuss the comparability of the strategies we identified and highlight potential problems where appropriate.

The findings of the comparative-analytical part are supported by information extracted from our local experts’ answers to a number of hypothetical scenarios. The use of this tool allowed us to uncover hidden uncertainties, differences and practices which would not have been easy to spot based purely on a description of the law, however elaborate.

Lastly, the second part will draw conclusions from the legal landscape and will try to identify the relevant legal issues and gaps in the legal framework.

The Annex contains 28 country reports setting out the law of the Member States underlying directors’ duties and liability. All country reports follow, to the extent possible, the following template in order to facilitate orientation and comparison.

Overview of the regulatory regime and ownership structure of local companies.

Who is considered director under the local law (eligibility, de facto/shadow directors).

Content of directors’ duties under local law (duties of care, loyalty, etc).

Which are directors’ duties in the vicinity of insolvency (file for insolvency, wrongful trading).

Which types of liabilities directors incur and in relation to whom (company, third parties)

How claims based on breach of liability are enforced, by the company, by shareholders or by creditors.

Relevant conflict of laws rules, depending on the type of claim (company law rule, tort law, contract law, or insolvency law)

The country reports strive to depict the local law currently in force comprehensively, adding necessary information on its historical and dogmatic background. They are entirely descriptive and refrain from assessing the legal framework in terms of completeness or efficiency.

Purpose of this study

This study is designed to assist the European Commission in assessing the EU approach to and policy on corporate law. It focuses on the issues of company directors’ duties and liability. It strives to enable policy makers to obtain a clearer picture of Member States’ statutory law, case law and supervisory and corporate practices in respect of directors’ duties and liability. Further, it identifies gaps and incompatibilities of the legal frameworks of Member States that may materialise in crossjurisdictional situations.

History of the Commission’s work on directors’ duties and liability

The High Level Group of Company Law Experts, which was set up by the Commission with a view to making recommendations on company law modernisation has recommended, in its 2002 report, amongst other things, the strengthening of the accountability of directors when the company is threatened by insolvency by introducing a rule on "wrongful trading" at EU level.4 Such a rule should hold company directors (including shadow directors) accountable for letting the company continue to do business when it can be foreseen that the company will not be able to pay its debts as they fall

4 Report of the high level group of company law experts on a modern regulatory framework for company law in Europe, Brussels (2002), available at: http://ec.europa.eu/internal_market/company/docs/modern/report_en.pdf.

xxiv Directors’ Duties and Liability in the EU

due. The group emphasised the usefulness of such a rule while adding that there was no need to harmonise the whole body of directors' liability rules in all Member States.

The Commission included this idea in its 2003 Communication on Modernising Company Law. It stated however that concrete proposals would need further analysis before they are made. The proposal to introduce focussed harmonising legislation was then tested by the Commission in the context of its 2006 public consultation on future priorities for the 2003 Action Plan on Company law and Corporate Governance. The majority of respondents opposed any EU initiative in this regard. Amongst other things, it was argued that there were no current substantial cross-border problems requiring a common EU solution. Nonetheless, there was much support for preparing a study focusing on the different systems of directors’ responsibilities and liability. The study should establish the existence of a basis for common EU standards on some major principles and issues.

In its 2010 Green Paper on Corporate Governance for Financial Institutions, the Commission raised the wider question of whether civil and/or criminal liability of directors needs to be strengthened. The invitation for comments was mainly designed as an information gathering exercise; there were no developed arguments in support or against the proposition, while it was expressly stated that additional in-depth work would be necessary.

Just recently, in its December 2012 Action Plan on European Company Law and Corporate Governance, the European Commission announced to take up a number of initiatives intended to modernise company law and corporate governance in the EU. Amongst the measure envisaged is the strengthening of shareholder oversight over related party transactions of company directors. This study, in the context of analysing the duty of loyalty, already provides an analysis of the current state of play in Member States.

Scope

This study covers both duties and the consequential liability of directors. Directors’ liability is the corollary of a number of diverse duties imposed on them, either individually or as a group. For this reason, the application of laws addressing directors’ duties and liability is closely related to and interacts with other legal rules and statutory provisions on corporate governance.

However, the legal framework regarding directors’ duties and corresponding liability is not well explored at the EU level. This is also due to the level of complexity of the matter, as different jurisdictions may have differing rules on

the character and variety of duties;

the changes of duties when a company comes close to or enters insolvency;

the exact circle of persons bound by these duties;

the exact circle of persons to whom these duties are owed;

the kind of liability entailed;

the procedures for enforcing duties and liability related claims; and,

the treatment of cross-jurisdictional situations.

xxvDirectors’ Duties and Liability in the EU

Unsurprisingly, the rules governing the above and other related issues are widely spread over the different areas of law, such as company law, civil law, insolvency law, tort law and criminal law.

Further, the sources vary considerably, from statutory law to case law but also including other regulatory instruments like stock exchange rules and rules promulgated by self-regulatory organisations. Any assessment of duties and corresponding liability of directors requires an aggregation of these sources.

Therefore, in its fact-finding part, this study is a mapping exercise. The country reports contained in the Annex set out a comprehensive local picture regarding content, sources and practice in respect of directors’ duties and liability for each of the 28 jurisdictions. The comparative part aggregates this information so as to produce an overarching, bigger image in relation to the EU as a whole, identifying similarities, gaps, and difficulties between the various domestic regimes.

There are, however, two restrictions to the scope.

First, the study is generally limited to pre-insolvency situations. In other words, it will not cover duties and corresponding liability arising on insolvency. Yet, it covers duties and corresponding liability in the vicinity of insolvency, i.e., the "twilight zone" period. This restriction to the scope is slightly blurred in certain cases as the borderline between preinsolvency and insolvency situations differs between the laws of Member States.

Second, though generally all companies are covered, regardless of their business (in

particular: financial and non-financial ones), the study is primarily focussed on public companies, i.e. those subject to the Second Company Law Directive,5 such as the ‘plc’, ‘AG’ or ‘SA’.

Main methodological elements

Multi-tier scrutiny of research

This study organised the relevant research activity in several layers in order to guarantee accurateness and completeness.

Country reports were drafted by local researchers. A template and prototype report were used as basis so as to guarantee the same level of awareness of the relevant problems of all researchers involved in the drafting.

Each country report was scrutinised by an eminent local company law expert who provided additional input and gave a second view on the substance. At the same time, the authors of this study were closely involved in the revision of the country reports, ensuring completeness and comparability.

The authors of the study aggregated the findings of all country reports and prepared the relevant conclusions from the comparative analysis.

At an early stage, preliminary conclusions were submitted to a high-level steering committee made up of leading legal scholars for review and additional input. The comparative-analytical part was refined on that basis and again submitted to the steering committee for comments.

Throughout the process of drafting the comparative-analytical part, the authors conducted additional fact finding, notably by way of interviewing eminent local experts that had not been

5See now Directive 77/91/EEC of 13 December 19762012/30/EU, OJ 2012 L 315/74.

xxviDirectors’ Duties and Liability in the EU

involved in the drafting process so far. In particular in respect of practical enforcement of directors’ duties the authors sought this input from leading local practitioners.

Functionality

It is important to obtain pristine and unaltered information on each jurisdiction’s legal framework regarding directors’ duties and liability. However, there is a general risk of obtaining biased or incomplete information as local authors tend to view legal problems through the lens of the relevant national legal discourse. To tackle problems relating to this phenomenon, the comparative-analytical part of the study has been prepared with a strictly functional approach in mind.

That is, practical problems are described and concrete questions are asked without reference to any specific legal rules and without employing terminology ‘borrowed’ from one of the jurisdictions. Only this method allows aggregating sensibly information gathered in the country reports. General and specific legal concepts in Member States are not necessarily the same and an attempt to work along legal classification would bear the risk of comparing what is not necessarily comparable.

In order to assess not only the law on the books, but also the law in practice, we conducted a number of interviews with practitioners from leading law firms in all Member States. We asked questions regarding the practical role that directors’ duties play in the respective jurisdiction, the risk of liability that directors face, the likelihood of enforcement before insolvency and in insolvency, the relevance of the derivative action, and generally potential obstacles to an efficient enforcement. The answers to these questions allowed us to draw tentative conclusions regarding perceptions of the effectiveness of the regulatory regime. In the comparative part, we refer to these answers where appropriate. It should be noted that our conclusions are not based on a representative survey. In addition, they relate to the perceived effectiveness of the regulation of directors’ duties, rather than quantifiable indicators of enforcement output. We are grateful to all practitioners who have contributed to the study and made time available to answer our questions.

Hypothetical scenarios

Experience shows that any comparative legal study that exclusively focuses on abstract questions and generic description and comparison of the local laws is not only hardly vivid but first and foremost prone to be incorrect or incomplete. This is because only a concrete testing of the abstract and generic findings against concrete cases regularly reveals the full range of intricacies and interdependencies. Further, local laws (and local jurists) tend to see the law in purely national categories, generally neglecting the potentially distorting effect flowing from the involvement of crossjurisdictional elements.

Consequently, we have included in respect of most countries the likely solutions to hypothetical scenarios, drafted by local experts, which cover a broad range of pertinent problems connected to directors’ duties and liability. The concrete answers given under the relevant local law were factored into our comparative analysis in order to support its accurateness and functionality.

Cross-jurisdictional aspects

National legislators tend to consider legislation from a purely domestic angle, often neglecting any potential distortion stemming from cross-jurisdictional incompatibilities. Consequently, national law often contains no or little guidance as to the comprehensive solution of such situations. Therefore, this study pays particular attention to the issue of cross-jurisdictional incompatibilities.

xxvii Directors’ Duties and Liability in the EU

Difficulties

The most significant difficulties in preparing this Study consisted in the following.

Member states’ legal frameworks in respect of a specific question, here directors’ duties and liability, often differ considerably, in terms of concepts, content, sources, etc. However, in order to keep this study manageable, country reports should follow the same structure and deal with exactly the same questions. Researchers and country experts have found it difficult to transpose their thinking into the standard structure of thought we asked them to follow. We have consequently invested a great deal of work with a view make findings comparable and manageable so as to guarantee a consistently structured and easily accessible final product.

The degree of sophistication of the legal literature and the case law in respect of the relevant questions varies enormously. This is not a surprise given that a number of Member States have smaller markets and some have also re-entered the market economy only about 20 years ago. Obviously, one cannot expect the same degree of guidance from courts and academic writing across Europe, and our experience so far shows that legal problems discussed in detail for several decades in some jurisdictions have hardly been addressed in others. As a consequence of these differences, authors and reviewers from a number of countries are unable to provide us with authoritative and specific answers to some of our more detailed questions. Therefore, as a consequence, our discussion and analysis of some of the more complicated legal concepts tends to rely more on a subset of European jurisdictions.

Equally a typical phenomenon in comparative studies of the present kind, the crossjurisdictional aspect is not prominently addressed in most Member States. In other words, it is extremely difficult extracting the relevant information, also because guidance from courts and literature is scarce. This issue is further addressed in the comparative-analytical part, below.

xxviii Directors’ Duties and Liability in the EU