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

  • Horst Eidenmüller (a1), Andreas Engert (a2) and Lars Hornuf (a3)

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.

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* 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.

** Prof. Dr Horst Eidenmüller, LL.M. (Cambridge), holds the Chair of Private Law, German, European and International Company Law at the University of Munich (Research Professorship). E-mail: .

*** Privatdozent Dr Andreas Engert, LL.M. (University of Chicago), is a Lecturer at the University of Munich. E-mail: .

**** Lars Hornuf, M.A. (Essex), is a Ph.D. student at the Department of Economics, University of Munich. E-mail: .

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European Business Organization Law Review (EBOR)
  • ISSN: 1566-7529
  • EISSN: 1741-6205
  • URL: /core/journals/european-business-organization-law-review-ebor
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