Volume 6, Issue 4

In many legal regimes, corporate restructuring operations are facilitated by the universal succession mechanism applied especially to operations of fusions, scissions and partial mergers. The universal succession is a particularly efficient instrument for the realization of those operations because it enables, notably, dissolutions without liquidation. However, we notice that this mechanism, likely to be applied generally and automatically, encounters various obstacles with different legal systems, French law bringing many illustrations of conflicts of principles limiting the scope of the universal succession.

The squeeze-out right grants a majority shareholder the right to force the minority to sell their financial instruments to the majority shareholder. Its counterpart, the sell-out right, is the right of a minority shareholder to compel the majority shareholder to purchase the shares of theminority. Most European Member States had already incorporated a corporate squeeze-out right into their legal systems. The Takeover Directive introduced both rights after a takeover bid into the European Member States. This paper assesses the European and national legislation of Belgium, France, the Netherlands, the UK and Germany regarding both the ‘takeover’ squeeze-out and sell-out and the ‘corporate’ squeeze-out and sell-out rules. More precisely, the types of target companies, the thresholds which need to be met before these rights can be asserted, the financial instruments that can be squeezed or sold out, and the valuation methods used to calculate compensation for minority shareholders are dealt with. From a cross country analysis of these aspects, we conclude that, although the Takeover Directive aims at minimum harmonisation, its implementation into the Member States' legislations created several differences and layers of legislation. This has led to the undesirable result that the procedures for squeezing out or selling out vary between Member States, confronting minority shareholders with different levels of protection and majority shareholders with minorities that can hardly ever, or in some cases never, be frozen out.

The global financial crisis has exposed the many limits of disclosure as an effective regulatory tool in financial markets. First, the famed disciplining power of the market failed to constrain disastrous risk taking by banks. Second, most of the risks that led to the creation of the 2008 catastrophe were often fully disclosed but the markets failed to understand them. In the case of banks, disclosure-based market discipline failed mainly because of the implicit government guarantee. In the case of capital markets, the reasons for disclosure's failure were product complexity and the impact of socio-psychological factors. Yet much of European Financial Regulation is based on the disclosure paradigm to remedy market failure, discipline market actors, improve investor/consumer choice, and prevent abuse. The EU needs to reexamine the role of disclosure in two contexts: prudential regulation of banks and retail investor protection. EU policy-makers should use empirical and experimental studies before any reform of the investor protection framework. Insertion of default options in a variety of financial contracts may be a necessary supplement to disclosure for retail investors. Furthermore, an independent EU financial products committee would be a better regulatory protection strategy than reliance on investor choice assisted by enhanced disclosure.

The financial scandals of the last decade have called into question the effectiveness of the system of securities regulation in many countries. Articles that have examined the origins of the regulatory crisis have concluded that the classical tools of corporate governance for the supervision of management have lost their force as a result of new incentive structures in the financial markets. They see as the solution to the regulatory lacunae the utilisation of financial intermediaries as gatekeepers, i. e. as agents that ensure compliance of the primary market actor (the issuer) with applicable rules by reviewing its disclosures and withholding their participation in transactions if violations occur. This essay analyses the most important liability provisions of US and European securities regulation in light of the gatekeeper theory. It identifies deficiencies in the current regulatory regime, suggests that some aspects of US securities regulation may serve as an example for a development of the European system, and highlights the dangers that a lack of legislative attention and a reorientation of the judiciary towards general principles of tort law create. It concludes by advancing a tentative explanation of certain trends of convergence between US and European regulatory mechanisms that can be observed.