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

Published online by Cambridge University Press:  19 May 2009

Horst Eidenmüller ,
Andreas Engert  and
Lars Hornuf
Horst Eidenmüller
Affiliation:
Raum 206, Veterinärstr. 5, 80539 München, Tel.: +49 (0)89 / 2180 - 3306 Email: horst.eidenmueller@jura.uni-muenchen.de
Andreas Engert
Affiliation:
Raum 101, Veterinärstr. 5, 80539 München, Tel.: +49 (0)89 / 2180 - 2023, Fax: +49 89 21 80 - 992023, Email: engert@jura.uni-muenchen.de
Lars Hornuf
Affiliation:
Email: lars.hornuf@jura.uni-muenchen.de
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Abstract

After a slow start, the European Company (Societas Europaea – SE) has become increasingly popular. Besides 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 codetermination 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 arbitrageregulatory arbitrageregulatory competitioncharter competitionSocietas EuropaeaEuropean CompanyEC company lawincorporation
Type
Articles
Information
European Business Organization Law Review (EBOR) , Volume 10 , Issue 1 , March 2009 , pp. 1 - 33
Copyright
Copyright © T.M.C. Asser Press and the Authors 2009

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References

* We would like to thank the 26 interview participants without whom this project would not have been possible. Furthermore, we are indebted to John Armour, Matthias Dischinger, Andreas Haufler, Tobias Tröger, Joachim Winter, Klaus Wohlrabe and participants in the Public Economics Seminar at the University of Munich, the Conference on Changing Perspectives on Corporate Law and Economics at the Erasmus University Rotterdam and the Conference on New Developments in Law and Economics at the University of Innsbruck.