Corporate Governance of Non-listed Companies

by McCahery, Joseph A.; Vermeulen, Erik P.M.

• ISBN13: 9780199596386
• ISBN10: 0199596387
• Format: Paperback
• Copyright: 2010-11-19
• Publisher: Oxford University Press

Summary

Studies of corporate governance traditionally focus on the governance problems of large publicly held firms, and policymakers' recommendations often focus on such firms. However most small firms, and in many countries, even many large companies, are non-listed. This book provides acomprehensive account of non-listed businesses and their particular governance problems. It explores current discussions and reforms in Europe, the United States, and Asia providing a state of the art account of the law and the economics.Non-listed firms encompass a vast range, from corporations with the potential to go public through family-owned firms, group-owned firms, private equity and hedge funds, to joint ventures and unlisted mass-privatized corporations with a relatively high number of shareholders.The governance of non-listed companies has traditionally been concerned with protecting investors and creditors from managerial opportunism. However, the virtual elimination of the distinction between partnerships and corporations means that an effective legal governance framework must also offermechanisms to protect shareholders from the misconduct of other shareholders.This volume examines policy and economic measurements to develop a framework for understanding what constitutes good governance in non-listed companies. The authors examine how control is gained and explore the mechanisms that contribute to the development of a modern and efficient governanceframework. The book concludes with an exploration of how the closely held firm is likely to stimulate growth and extend innovation and development.

Author Biography

Joseph A. McCahery is Professor of International Economic Law at Tilburg University School of Law, Professor of Financial Market Regulation at Tilburg Law Economics Center, and Visiting Goldschmidt Professor of Corporate Governance at Solvay Brussels School of Economics and Management. Erik P. M. Vermeulen is Professor of Business Law at Tilburg University School of Law, Professor of Financial Market Regulation at Tilburg Law Economics Center and Vice-President, Philips International BV.

Table of Contents

List of Figures	p. xiii
List of Tables	p. xv
Table of Cases	p. xvii
Table of Legislation and Guidelines	p. xix
List of Abbreviations	p. xxvii
The Corporate Governance Framework of Non-listed Companies	p. 1
Three Pillars of the Governance Framework	p. 1
The Economic Structure of Non-listed Companies	p. 6
Overview	p. 13
Conclusion	p. 15
The First Pillar: Company Law A-One-Size-Fits-All Vehicle for Non-listed Companies	p. 16
The Emergence of the Corporation or Joint Stock Company	p. 16
The Corporate Form as a Standard Contract	p. 22
The Rise of the Close Corporation	p. 24
The Close Corporation as a One-Size-Fits-All Vehicle in the Twentieth Century	p. 31
Disclosure and Transparency	p. 37
'Shareholder' Participation and Dividends	p. 45
Minority Shareholder Protection	p. 47
The Close Corporation as an All-Purpose Vehicle in the Twenty-First Century	p. 54
Company Law Developments in Europe	p. 56
Introduction	p. 56
EU Legislation as the Foundation for Corporate Law Reform	p. 59
The EU Corporate Law Directives	p. 59
Corporate Law Harmonization: The Establishment of the EU Corporate Law Regime and the First Generation of Corporate Law Directives	p. 60
Later Harmonization and the Adoption of the Directive on Cross-border Mergers	p. 62
EU-Level Business Forms as an Impetus for Corporate Law Reform	p. 64
The Practical Impact of the SE	p. 66
ECJ Case Law as the Foundation for Corporate Law Reform	p. 71
The 'Incorporation Mobility' Case Law	p. 71
The 'Reincorporation Mobility' Case Law	p. 74
The Effect of the Incorporation Mobility on Company Law Reform	p. 75
Barriers to Reincorporation Mobility in the EU	p. 84
The Status Quo Barrier	p. 85
The Exit Tax Barrier	p. 91
Possible Solutions to the Reincorporation Mobility Barriers	p. 94
EU-level Legislative Measures	p. 94
ECJ Case Law	p. 95
The Effect of Reincorporation Mobility on Company Law Reform	p. 97
Company Law Developments in the United States and Asia	p. 100
Introduction	p. 100
Developments in the United States	p. 104
The LLC: The Entity of Choice for US Non-listed Firms	p. 114
Entity Status	p. 114
Capital Structure and Contributions	p. 114
Distributions	p. 115
Members' Interests	p. 116
Internal Organization	p. 117
Minority Protection	p. 118
The Introduction of Hybrid Business Forms in Asia	p. 124
The Impact of Hybrid Business Forms on the Economy	p. 128
The Inherent Benefits of Hybrid Business Forms	p. 133
Limited Liability and Pass-through Taxation	p. 133
Limited Liability and Private Ordering	p. 137
Conclusion	p. 142
The Second Pillar: Contractual Arrangements	p. 144
Introduction	p. 144
Joint Ventures	p. 145
Mutual Reliance Provisions	p. 148
Dispute Resolution and Termination	p. 149
Family-owned Firms	p. 152
Venture Capital-backed Firms	p. 156
Governance and Screening of Venture Capital Firms	p. 159
Staged Financing of Venture Capital Investment	p. 160
The Monitoring Process	p. 162
Convertible Preferred Stock	p. 163
The Exit Strategy of Venture Capital Firms	p. 164
Private Equity Funds and Hedge Funds	p. 167
The Contractual Governance of Private Equity Funds and Hedge Funds: A Case Study	p. 171
Introduction	p. 171
Hedge Funds Versus Private Equity	p. 173
Hedge Funds and Private Equity Activities	p. 177
Hedge Funds	p. 177
Private Equity	p. 181
The Pooled Investment Vehicle: Hedge Funds and Private Equity	p. 185
The Limited Partnership Structure	p. 185
Restrictive Convenants	p. 189
Conclusion: Convergence and Diversity of Hedge Funds and Private Equity	p. 191
The Third Pillar: Optional Guidelines	p. 193
Introduction	p. 193
The Contemporary Debate on Corporate Governance	p. 194
Non-listed Companies: Voluntary Compliance with Corporate Governance Measures	p. 201
The Future of Corporate Governance: 'Refocus on Non-listed Companies	p. 207
Optional Guidelines for Non-listed Companies	p. 210
Conclusion	p. 218
Hybrid Business Forms and the Regulation of Illicit Transactions	p. 220
Introduction	p. 220
Controlling Shareholdings	p. 223
Related Party Transactions	p. 225
Why Should One Care About Related Party Transactions	p. 225
Understanding the Competing Regulatory Visions	p. 226
Identifying Related Party Transactions	p. 227
Parmalat	p. 228
Regulation of Related Party Transactions	p. 231
Information and Transparency	p. 231
Special Purpose Entities	p. 233
Legal Business Entities and their Potential for Misuse	p. 234
Chain of Legal Vehicles	p. 237
Disclosure of Beneficial Interest	p. 238
Combating Money Laundering and the Role of Intermediaries	p. 239
Conclusion	p. 243
Governance of Non-listed Companies: The Way Forward	p. 245
A New Corporate Governance Debate	p. 245
The Corporate Governance Framework of Non-listed Companies	p. 246
Company Law Restrictions on Foreign Direct Investment	p. 249
The Development of an Equity-oriented Market	p. 250
The Going Private Decision and the Listing of Private Equity Firms	p. 250
Where We Stand	p. 252
References	p. 253
Index	p. 265
Table of Contents provided by Ingram. All Rights Reserved.