¹ Among the relevant literature, see Cary, William L., Federalism and Corporate Law: Reflections upon Delaware, 83 Yale L.J. 663 (1974); Ralph K. Winter, State Law, Shareholder Protection, and the Theory of the Corporation, 6 J. Legal Stud. 251 (1977); Roberta Romano, The State Competition Debate in Corporate Law, 8 Cardozo L. Rev. 709 (1987); Lucian Ayre Bebchuk, Federalism and the Corporation: The Desirable Limits on State Competition in Corporate Law, 105 Harv. L. Rev. 1435 (1992); Roberta Romano, Explaining American Exceptionalism in Corporate Law, in International Regulatory Competition and Coordination 127 (1996); William J. Carney, Federalism and Corporate Law: A Non-Delaware View of Results of Competition, in: International Regulatory Competition and Coordination 153 (1996); and William W. Bratton & Joseph McCahery, Regulatory Competition as Regulatory Capture: The Case of Corporate Law in the USA, in: International Regulatory Competition and Coordination 207 (1996).Google Scholar

² For an overview see Lombardo, Stefano, Regulatory Competition in Company Law in the European Community 86-91 (2002).Google Scholar

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⁴ Romano, Roberta, Law as a Product: Some Pieces of the Incorporation Puzzle, 1 J.L. Econ. & Org. 225 (1985). This approach is also used by Lombardo, supra note 2, at 59-61.Google Scholar

⁵ Lombardo, supra note 2, at 83-101.Google Scholar

⁶ Heine, supra note 3, at 91-94, 141-45.Google Scholar

⁷ Kahan, Marcel & Kamar, Ehud, The Myth of State Competition in Corporate Law, 55 Stan. L. Rev. 679, 687-700 (2002).Google Scholar

⁸ Heine, supra note 3, at 145-49.Google Scholar

⁹ Romano, supra note 4.Google Scholar

¹⁰ Heine, supra note 3, at 149-52.Google Scholar

¹¹ Roberta Romano, The Genius of American Corporate Law 43 (1993).Google Scholar

¹² Heine, supra note 3, at 147.Google Scholar

¹³ Heine, supra note 3, at 234.Google Scholar

¹⁴ Heine, supra note 3, at 152.Google Scholar

¹⁵ Heine, supra note 3, at 164-67.Google Scholar

¹⁶ Heine, supra note 3, at 174-87.Google Scholar

¹⁷ Carney, William J., The Political Economy of Competition for Corporate Charters, 26 J. Legal Stud. 303 (1997).Google Scholar

¹⁸ Heine, supra note 3, at 191. Concerning the problem of workers codetermination systems, Lombardo comes to the same result. See Lombardo, , supra note 2, at 167-70.Google Scholar

¹⁹ Heine, supra note 3, at 192-94.Google Scholar

²⁰ Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on takeover bids, 2004 O.J. (L 142) 12. For an account of the history see Zumbansen, Peer, European Corporate Law and National Divergences: The Case of Takeover Regulation, in 3 Wash. U. Global Stud. L. Rev. 867 (2004).Google Scholar

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²² With the same conclusion also see Gordon, Jeffrey N., Corporations, Markets and Courts, 91 Colum. L. Rev. 1931 (1991), 1971.Google Scholar

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²⁴ Heine, supra note 3, 194–232. See also Heine, Klaus & Kerber, Wolfgang, European Corporate Laws, Regulatory Competition and Path Dependency, 13 Eur. J. L. & Econ. 47 (2001).Google Scholar

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²⁷ For this approach see especially Henry Hansman & Reiner Kraakman, The End of History for Corporate Law, 89 Geo. L.J. 439 (2001), reprinted e.g. in: Convergence and Divergence in Corporate Governance 33 (Gordon, Jeffrey N. & Roe, Mark J., eds., 2004).Google Scholar

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²⁹ Second Council Directive 77/91/EEC of 13 December 1976 on coordination of safeguards, which, for the protection of the interests of members and others, are required by Member States of companies within the meaning of the second paragraph of Article 58 of the Treaty, in respect of the formation of public limited liability companies and the maintenance and alteration of their capital, with a view to making such safeguards equivalent, Official Journal L 26, 31/01/1977 p. 1 ff.Google Scholar

³⁰ For the current state of the reform see European Commission, Modernization of Company Law and Enhancement of Corporate Governance in the European Union – A Plan to Move Forward, available at: http://europa.eu.int/comm/internal_market/en/company/company/modern/index.htm.Google Scholar

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³² Heine, supra note 3, at 231.Google Scholar

³³ The application of a corporate law with low protection of creditors in a legal system with a strong protection of creditors in corporate law might, therefore, cause an insufficiently low level of creditor protection. As a consequence, the costs of capital for this corporation might, therefore, increase and diminish the increase in efficiency by the application of this corporate law. This effect is also known in conflicts of law as the problem of characterization. See Weintraub, Russell J., Commentary on the Conflicts of Law 49-55 (4^th ed. 2001); Christian von Bar & Peter Mankowski, Internationales Privatrecht – Band I 712 (2^nd ed. 2003).Google Scholar

³⁴ Heine reaches this conclusion for the problem of path dependency and legislative competition in corporate law, but acknowledges that further research might be necessary in order to apply this as a general conclusion for the theory of path dependency. See Heine, , supra note 3, at 229, 238.Google Scholar

³⁵ See especially Schmidt, Karsten, Editorial: Verlust der Mitte durch “Inspire Art”? – Verwerfungen im Unternehmensrecht durch Schreckreaktionen der Literatur, 168 Zeitschrift für das gesamte Handelsrecht und Wirtschaftsrecht [ZHR] 493 (2004). For contract law see Fleischer, Holger, Gesetz und Vertrag als alternative Problemlösungsmodelle im Gesellschaftsrecht, 168 Zeitschrift für das gesamte Handelsrecht und Wirtschaftsrecht [ZHR] 673 (2004).Google Scholar

³⁶ For commentary on the Überseering and Inspire Art decisions by the ECJ, see Bälz, Kilian & Baldwin, Teresa, The End of the Real Seat Theory (Sitztheorie): the European Court of Justice Decision in Ueberseering of 5 November 2002 and its Impact on German and European Company Law, in 3 German L.J. No. 12 (1 December 2002), available at http://www.germanlawjournal.com/article.php?id=214; Christian Kersting & Clemens Philipp Schindler, The ECJ's Inspire Art Decision of 30 September 2003 and its Effects on Practice, in 4 German L.J. No. 12 (1 December 2003), 1277-1291, available at: http://www.germanlawjournal.com/article.php?id=344. For a comprehensive analysis of the real seat theory see Schulz, Martin, European Challenges for German Corporate Law: An Analysis of the recent Jurisprudence of the European Court of Justice on the Freedom of Establishment and its Impact on German Company Law and Conflicts of Laws, in: Annual of German & European Law, Vol. II (Miller, Russell & Zumbansen, Peer, eds., 2005) [forthcoming].Google Scholar

³⁷ For an overview of the state of the art of the harmonization of European Company Law see Lombardo, , supra note 2, at 25-55.Google Scholar

³⁸ For further details see Lombardo, , supra note 2, at 41-44.Google Scholar

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⁴⁰ See the classical account by Alchian, Armen A. & Demsetz, Harold, Production, Information Costs, and Economic Organization, 62 Am. Econ. Rev. 777 (1972).Google Scholar

⁴¹ The basic agency problems that arise in the corporate context are agency problems between shareholders and managers, agency problems between majority and minority shareholders, and agency problems between shareholders and third parties. See Jensen, Michael C. & Meckling, William H., Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure, 3 J. Fin. Econ. 305 (1976).Google Scholar

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⁴⁷ EC Case C-208/00 [2002] ECR I-9919. On the Überseering decision, see e.g. Wulf-Henning Roth, 52 Int'l & Comp. L.Q. 177 (2003); Ebke, 58 Juristenzeitung 927 (2002); Eidenmüller, 23 ZIP 2233 (2002); Kilian Baelz & Teresa Baldwin, 3 German L.J. No. 12 (1 December 2002), available at http://www.germanlawjournal.com/article.php?id=214.Google Scholar

⁴⁸ EC Case C-167/01 [2003] ECR I-10155. See e.g. Erich Schanze & Andreas Jüttner, Die Aktiengesellschaft 661 (2003); Silja Maul, 58 BetriebsBerater 2297 (2003); Christian Kersting & Clemens Philipp Schneider, 4 German L.J. 1277 (1 December 2003), available at http://www.germanlawjournal.com/article.php?id=344.Google Scholar

⁴⁹ For a general overview see Mock, Sebastian, Harmonization, Regulation and Legislative Competition in European Company Law, 3 German L.J. No. 12 (1 December 2003), available at http://www.germanlawjournal.com/article.php?id=216.Google Scholar

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⁵¹ EC Case C-9/02 [2004] – Lasteyrie du Saillant, (German translation reprinted in 57 Neue Juristische Wochenschrift [NJW] 2439 (2004)).Google Scholar

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⁵³ See Zumbansen, Peer, supra note 20.Google Scholar

⁵⁴ Many regulations are based on model laws that are drafted by commissions and only later enacted by the states individually. Therefore differences can occur when single states do not enact later drafts of the model laws.Google Scholar

⁵⁵ For an overview of the UCC see http://www.law.cornell.edu/uniform/ucc.html.Google Scholar

⁵⁶ U.S. Const. art. I § 8 cl. 4.Google Scholar

⁵⁷ Nevertheless, differences remain and especially in the case law of the different courts of appeal. However, forum shopping occurs basically only in corporate reorganizations under Chapter 11. See Cole, Marcus, “Delaware is not a state”: Are We Witnessing Jurisdictional Competition in Bankruptcy, 55 Vand. L. Rev. 1845 (2002); Robert K. Rasmussen & Randall S. Thomas, Whiter the Race? A Comment on the Effects of the Delawarization of Corporate Reorganizations, 54 Vand. L. Rev. 283 (2001). For the limits of the general protection of bankruptcy law, see Lombardo, , supra note 2, at 96-99.Google Scholar

⁵⁸ However, a general obligation to comply with US-GAAP does not exist in the United States. Only businesses under coverage of the federal securities laws are required to comply with US-GAAP in their financial statements (Sec. 5 Securities Act 1933; Sec. 12, 13, 15(d) Exchange Act). Nevertheless, accountants tend to adopt SEC accounting practices even for firms not legally subject to them.Google Scholar

⁵⁹ See Restatement (Second) of Conflicts of Law (Philadelphia: American Law Institute, 1971), § 302.Google Scholar

⁶⁰ For an overview see Lombardo, , supra note 2, at 53.Google Scholar

⁶¹ Nevertheless, the lack of a harmonized or unified regime of securities regulation does not have to be regarded as a prerequisite for a European market of corporate charters (see section C(III), above).Google Scholar

⁶² Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards, 2002 O.J. (L 243), 1 available at: http://europa.eu.int/smartapi/cgi/sga_doc?smartapi!celexapi!prod!CELEXnumdoc&lg=en&numdoc=32002R1606&model=guicheti.Google Scholar

⁶³ As a consequence, the applicability of International Financial Reporting Standards will be different in every Member State. Due to the fact that the applicable law of accounting is determined by the law of incorporation, this fact might also become an important circumstance for firms in the choice of a Member State for incorporation. For the applicable laws of accounting see Westhoff, André, Rechnungslegung, in: Handbuch zum Grenzüberschreitenden Gesellschaftsrecht (Hirte, Heribert & Bücker, Thomas, eds., 2005).Google Scholar

⁶⁴ Gesetz zur Einführung internationaler Rechnungslegungsstandards und zur Sicherung der Qualität der Abschlussprüfung (Bilanzreformgesetz), vom 4. Dezember 2004, Bundesgesetzblatt I S. 3166.Google Scholar

⁶⁵ Council regulation (EC) No 1346/2000 of 29 May 2000 on insolvency proceedings; 2000 O.J. (L 160), 1.Google Scholar

⁶⁶ See Hirte, Heribert & Mock, Sebastian, Wohin mit der Insolvenzantragspflicht?, Zeitschrift für Wirtschaftsrecht [ZIP] 27 (2005) [forthcoming].Google Scholar

⁶⁷ For a U.S. perspective see Skeel, David A., Rethinking the Line Between Corporate Law and Corporate Bankruptcy, 72 Tex. L. Rev. 471 (1994), arguing that the separation of bankruptcy and company law in the United States has led to problems that undermined both areas of the law. Skeel therefore suggests that the law of corporate bankruptcy has to be returned to the states.Google Scholar

⁶⁸ See Amtsgericht (AG) (First Instance Court) Hamburg, Neue Zeitschrift für Insolvenzrecht [NZI] 5 (2003), 442. For a detailed discussion of the qualification of the Sec. 214 Insolvency Act 1986, see Mock, Sebastian & Schildt, Charlotte, Insolvenz, in: Handbuch zum Grenzüberschreitenden Gesellschaftsrecht (Hirte, Heribert & Bücker, Thomas, eds., 2005); Hans C. Hirt, The Wrongful Trading Remedy in UK Law: Classification, Application and Practical Significance, 1 Eur. Co. & Fin. L. Rev. 71 (2004).Google Scholar

⁶⁹ For an overview on this debate see Mock, & Schildt, , supra note 68.Google Scholar

⁷⁰ Mock, & Schildt, , supra note 68.Google Scholar

⁷¹ See note 62.Google Scholar

⁷² The case law on the regulation on insolvency proceedings shows that the courts of the Member States interpret the requirements of art. 3 in a very broad way. For an overview see Paulus, Christoph G., Zuständigkeitsfragen nach der Europäischen Insolvenzverordnung, Zeitschrift für Wirtschaftsrecht [ZIP] 24 (2002), 729.Google Scholar

⁷³ Heine also concludes that the lack of uniformity in securities regulation and bankruptcy law will limit the efficiency of a legislative competition in the European market for corporate charters. See Heine, , supra note 6, 231 ff.Google Scholar

⁷⁴ Inspire Art, supra note 48; Hirte, supra note 50.Google Scholar

⁷⁵ Cal. Corp. Code § 2115(a).Google Scholar

⁷⁶ Most significantly, the Sarbanes-Oxley Act introduced several duties for board members. As well, Sec. 10A(i) Exchange Act (15 U.S.C. § 78j-1) imposes duties for the audit committee; Sec. 13(k) Exchange Act (15 U.S.C. § 78m) prohibits loans to directors and officers.Google Scholar

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⁷⁸ Heine, supra note 3, at 239; Lombardo, supra note 2, at 203.Google Scholar

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⁸² See section C(IV), above.Google Scholar

⁸³ For a mandatory introduction to the liability for wrongful trading in the Member States, see Habersack, Mathias & Verse, Dirk A., Wrongful Trading – Grundlage einer europäischen Insolvenzverschleppungshaftung?, 168 Zeitschrift für das gesamte Handelsrecht und Wirtschaftsrecht [ZHR] 174, 214 (2004). Nevertheless, Habersack and Verse propose that only the general duty to enact a wrongful trading should be implemented by the European legislator. The details of such regulation should instead be left to the Member States. Nevertheless, a legislative competition – if to a smaller extent – would occur.Google Scholar

⁸⁴ For an overview see Lombardo, , supra note 2, at 53.Google Scholar

⁸⁵ For an overview see Adolff, Johannes, Turn of the Tide?: The “Golden Share” Judgements of the European Court of Justice and the Liberalization of the European Capital Markets, 3 German L.J. No. 8 (1 August 2002), available at http://www.germanlawjournal.com/article.php?id=170;. For the situation in Germany see Wellige, Kristian, Weg mit dem VW-Gesetz!, Europäische Zeitschrift für Wirtschaftsrecht [EuZW] 14 (2003), 427.Google Scholar

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⁸⁷ Id., 26-29.Google Scholar

⁸⁸ Id., 48-50. See also Heine, , supra note 3, at 152-67.Google Scholar

⁸⁹ For this development see Grossman, Ellen J., U.S. vs. International Stock Option Disclosure Reform: The International Community Leads Where the U.S. Community failed, 29 BROOK. J. INT'L L. 281 (2003); Sebastian Mock, Accounting for Stock-based Compensation, 16 Euro. Bus. L. Rev. 359 (2005).Google Scholar

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