Cross-border conversions — when a company moves its legal seat from one jurisdiction to the other but continues its legal personality — are increasingly important. But no regulatory framework establishes rules and procedures, creating many uncertainties. Under Belgian law, the national conversion procedure is the most suitable, but the remaining uncertainties give rise to the need for a specific legal framework. Although initiatives have yet to produce one, cross-border conversions remain possible, both from and to Belgium. Proper guidance from legal counsels in both countries is paramount.
Tracking trends in the world of corporate law
The winter 2016 edition of our Corporate and Commercial Law global update provides an overview of current legal affairs from 22 jurisdictions worldwide. The summaries below reflect the global reach of our network and the diversity of our services. For more details on our network or the topics discussed here, feel free to contact us.
The Brazilian Health Surveillance Agency regulated the transfer of licenses between companies through Resolution RDC No. 102 of 24 August 2016. The main modification is the possibility to transfer licenses and registrations under commercial operations (i.e., the purchase and sale of assets). Such transfers are allowed only when the conditions and technical and health characteristics of the companies, products and clinical trials are fully maintained.
Colombia has adopted comprehensive regulations and controls to protect personal information in recent years. Legislation has strengthened obligations for individuals and companies that handle personal data, including requirements to obtain consent before collecting information. Under the purpose limitation principle, owners must be told why their personal data is being collected and processed. Colombia has also adopted international safeguards, such as the accountability principle.
Examinership was introduced into the Cypriot legal order through an amendment to the Companies Law, Cap. 113. A company can enter examinership through a court order if it has a reasonable prospect of survival and if at least part of its undertaking is a going concern. The court must find that:
- The company is, or is likely to be, unable to pay its debts.
- No resolution for winding up the company has been passed and published in the Official Gazette of the Republic.
- No order to wind up the company has been issued.
To create equal competitive conditions and increase flexibility for companies, the Danish Business Authority has proposed a bill to amend the provisions on shareholder loans in the Danish Companies Act. If the bill passes, companies will be able to directly or indirectly advance funds to, make loans to or provide security for their shareholders or members of management. They must meet certain requirements so the transaction does not impose a loss on the company and its creditors.
The Finnish Supreme Court has ruled that a judgment against a liquidated limited liability company was binding on its sole shareholder. In 1981, a company was ordered to compensate an employee who was injured at work. The injuries worsened, and the employee filed another claim against the dissolved company in 2004. An appeals court ruled that the dissolved company was obliged to pay more damages. The employee then sued the sole shareholder, who disputed the claim. The Supreme Court concluded that the judgment can be extended to the shareholder because the shareholder knew of the 2004 claim and had a chance to protect its interests in the proceedings.
An ordinance to reform contract law introduces legal tools used in shareholder agreements into the French Civil Code, including the concepts of preference agreements and unilateral promises. A preference agreement is defined as “a contract by which one party undertakes to first offer the beneficiary to deal with him in case he decides to contract” (e.g., pre-emptive right, right of first offer or refusal). Article 1123 also introduces an interrogatory tool to enable a third party to end an ambiguous situation by forcing the beneficiary of the preference agreement to confirm the existence of such an agreement and any intent to take advantage of it.
In May 2015, the Chamber of Civil Cases of the Supreme Court of Georgia offered a significant interpretation on the personal liability of shareholders and directors for a company’s tax obligations. The court clarified Article 3.6 of the Law on Entrepreneurs, emphasizing that the provision is subject to a broad definition that includes not only the abuse of limited liability by a company but also the abuse of the notion of limited liability. The court decided that shareholders abuse limited liability when they personally lead and pursue an activity aimed at tax evasion — when partners use the company to generate undeclared income. The court ruled that shareholders and directors are personally liable for unpaid tax and penalties set forth by the Tax Code.
The Federal Supreme Court has emphasized that the specific requirements of Section 377 — which outlines the purchaser’s duties to examine delivered goods and make immediate complaints about defects — depend on the relevant industry or the individual case. In the case, a roll journal intended for construction and delivered by the seller was damaged. The court of appeal rejected the action brought by the purchaser. The Federal Supreme Court, however, found in favor of the purchaser, ruling that the court of appeal had been one-sided toward the seller when assessing the duties to examine the goods and make an immediate complaint.
The authoritative factors in determining what’s reasonable for the purchaser should be:
- The cost and time involved in the examination
- The inspection options available
- The need for some technical knowledge
- The need to include third parties
After two crucial amendments, Law 4354/2015 broadened and reformed the legislative framework for transferring and managing debt receivables from any loans or credits in Greece. The law provides for receivables management companies (RMCs) and receivables acquisition companies (RACs). Only RMCs are licensed by the Bank of Greece, not RACs, even though Bank of Greece supervises and regulates all transactions and the entire market. The law also sets no restrictions on the status of loans or credits to be serviced or purchased, covering both performing and nonperforming loans. The law attempts to attract international investors by providing that the RACs are not supervised by the Bank of Greece.
The Indian Ministry of Corporate Affairs has issued a notification for constituting the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT), effective 1 June 2016. The NCLT is a quasi-judicial body that will adjudicate corporate law issues. Its decisions can be appealed to the NCLAT. Establishment of the two institutions had been delayed because of debates and discussions about the constitutional validity of the NCLT. These disputes were settled by Madras Bar Association v. Union of India. The NCLT will take over all pending cases before the Company Law Board and will dispose of them in accordance with the provisions of the Companies Act 2013.
Japan has launched class actions as a special procedure of civil litigation to remedy damage caused to consumers. To prevent abuses, the law set limits on lawsuits. Plaintiffs must be consumer organizations approved by the Government (specified qualified consumer organizations, or SQCOs). Only qualified consumer organizations (QCOs) — those approved by the Government and engaging in certain consumer protection activities provided under the Consumer Contract Act — are eligible to be SQCOs. Cases are limited to monetary claims related to the consumer contract, requesting:
- Performance of an obligation under the contract
- Compensation for damage due to the breach of obligation (including nonperformance)
- Restitution of an unjust profit
- Compensation for damage due to defects
- Compensation for damage due to tort
The long-awaited Bill of Law 5730 amending and modernizing Luxembourg’s law on commercial companies took effect on 10 August 2016. The new law provides a legal basis for well-established market practices, and it seeks to develop new legal instruments to attract investors, multinational enterprises and private equity firms. Companies have a 24-month transition period to adapt their articles of association to the new provisions. The new law introduces key amendments affecting private limited liability companies, public companies limited by shares and all company types. It also introduces the simplified public limited company.
Seeking to attract foreign investment and promote economic development, Mexico amended its Industrial Property Law to implement a trademark opposition system, effective 30 August 2016. The change aligns Mexico’s industrial property framework with legislation in other countries.
The system has several advantages:
- The trademark registration process will not be interrupted by the filing of an opposition, streamlining the process.
- Applications will be published in a shorter time period, providing legal certainty to applicants.
- The arguments of a trademark opposition will not be binding for the trademark office’s examination, but they may help the authority make a better assessment and reduce the possibility that new registrations infringe on previously granted rights.
Recent litigation offers a reminder of the importance of good corporate governance. Under Section 271 of the Companies Act 1993, a court can order a company to pay some or all of the liquidation claims made against another company if the companies are related and it is just and equitable to do so. Steel & Tube Holdings Ltd. (STH) paid lease expenses on behalf of its subsidiary, Stube Industries (Stube). After Stube was put into liquidation, Lewis Holdings, the landlord, sought damages. The High Court found that STH Group acted as a single unit and upheld Lewis Holdings’ claim. The Court of Appeal followed suit, stating that a group should structure its affairs in accordance with the principle of separate corporate personality.
Parliament adopted an amendment that harmonizes the Norwegian Competition Act with the European Commission Merger Regulation on the conditions required for the Norwegian Competition Authority to intervene against mergers and acquisitions (concentrations). The Competition Authority is now required to prohibit concentrations that significantly impede effective competition, particularly by creating or strengthening a dominant position. Concentrations with a negative net effect for consumers, typically through lower quality or higher prices, will be barred even if the concentration on the whole creates an economic gain for the community.
Poland added new rules for compensating executives of companies with public shareholders through an act that took effect on 9 September 2016. It applies not only to state-owned enterprises but also to those in which public entities are minority shareholders. A public shareholder is obliged to undertake actions necessary to adopt a resolution establishing remuneration rules that comply with the statutory principles. The new act, covering an estimated 3,900 limited liability and joint-stock companies, is intended to make the maximum fixed compensation for executives contingent on the size and type of the company and to introduce clear and objective criteria for granting variable remuneration.
In 2015, Portugal adopted a new statutory framework governing private equity (PE) investment meant to pursue the EU’s growth agenda for small and medium-size enterprises. To provide investors with safeguards and prevent systemic risks, the new regime sets out rules on conflicts of interest, minimum capital requirements and exposure limits, among others. It softens the requirements applicable to PE investment vehicles whose portfolios comprise leveraged assets with a value equal to or below EUR100 million or non-leveraged assets with a value equal to or below EUR500 million whose portfolios have no redemption rights exercisable for five years after initial investment.
Starting 1 January 2017, a large-scale transaction has an additional criterion: it should not only involve more than 25% of a company’s assets but also go beyond the normal course of business. Transactions in the normal course of business are those that:
- Are usual for a company or other companies engaged in the same business, irrespective of whether the company executed such transactions before
- Do not lead to a termination of company activity or change its nature or scale
A company’s board members, CEO, shareholders controlling 20% or more and certain other individuals may be recognized as interested parties — e.g., where they or their relatives are a party to a transaction with the company or hold management positions in the company’s counterparty. Starting 1 January 2017, interested-party transactions by default will not require approval from the non-interested shareholders or board members.
A Serbian law effective 1 June 2016 introduces a register of temporary restrictions imposed on business entities. The Central Register of Temporary Restrictions of Rights of Entities Registered with the Serbian Business Registers Agency (SBRA) represents the first time such information is available on the SBRA website. The main aim of the law is to improve security and transparency in business transactions. Companies can now access information about other companies involved in transactions with them. The Central Register should help decrease nonpayable claims due to limitations imposed on companies by authorities.
An act effective 1 July 2016 introduced direct criminal liability of legal entities, meaning that companies and other legal entities may be convicted and punished for crimes. The legislation applies to both Slovak and foreign legal entities, so it may have complex legal consequences outside Slovakia. Under certain conditions, a legal entity is criminally liable for specific offenses committed by its representatives (even regular employees not formally authorized to act on its behalf). These include tax crimes, environmental crimes, bribery, cybercrimes and unlawful employment.
Vietnam lacks a consolidated law on data privacy and protection, but piecemeal regulations can be found in various forms of legislation.
- Article 31 of the Civil Code of Vietnam stipulates an individual’s rights with respect to photographs.
- Article 38 of the Civil Code of Vietnam mandates that personal privacy must be respected and protected by laws.
- Chapter VI of the Law on E-commerce 2005 regulates security, safety, protection and confidentiality in e-commerce transactions.
- Article 72 of the Law on Information Technology 2006 regulates information safety and confidentiality on a network.
- Article 125 of Criminal Law 1999 states that using personal data for slander and insult could lead to seven years of imprisonment.
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