CHOICE OF FORM II Commercial Partnerships - Basics Limited Partnerships (Kommanditgesellschaft/societe en commandite simple)and Creditors Limited Partners: member's participation maximum amount General Partner unlimited liability Hybrids Problem zones: Decision-making process Lack of comprehensive legal personality Insolvency scenario CESLELECTIVE-APRIL2016
CESL ELECTIVE - APRIL 2016 21 CHOICE OF FORM II ▪Commercial Partnerships - Basics ►Limited Partnerships (Kommanditgesellschaft/société en commandite simple) and Creditors - Limited Partners: member’s participation maximum amount - General Partner unlimited liability ►Problem zones: Decision-making process Lack of comprehensive legal personality Insolvency scenario Hybrids
CHOICE OF FORM III Business Advantages of a Corporate Entity Separate Legal Personality( Protection from Creditors Limited Liability( Assessment of Maximum Losses Centralised Management under a board Structure Free Transferability of Shares (Investor Ownership by Contributors of Capital) How to number of shareholders? Best Corporate Form Listed Corporations Non-listed corporations/private(closed corporations) CESLELECTIVE-APRIL2016 22
CESL ELECTIVE - APRIL 2016 22 CHOICE OF FORM III ►Business Advantages of a Corporate Entity - Separate Legal Personality ( Protection from Creditors) - Limited Liability ( Assessment of Maximum Losses) - Centralised Management under a Board Structure - Free Transferability of Shares (Investor Ownership by Contributors of Capital) ►Best Corporate Form Listed Corporations Non-listed corporations/private (closed corporations) How to limit number of shareholders?
CHOICE OF FORM IV >Listed Corporations Shareholders agreements big enterprises and larger number of shareholders (but consider block-holdings v dispersed ownership) statutory requirements and corporate governance codes capital markets can tapped (raising legal capital or IPos) freedom of contracts is severely restricted by statutory law in order to protect creditors and minority shareholders(cf. shareholders'agreements) 2 Legal Materials of the European Union Second Company Law Directive (Minimum Capital for (Non-)Listed Corporations(Public limited Companies) Regulation on the Societas Europaea(EC 2157 /2001) CESLELECTIVE-APRIL2016
CESL ELECTIVE - APRIL 2016 23 CHOICE OF FORM IV ►Listed Corporations - big enterprises and larger number of shareholders (but consider block-holdings v. dispersed ownership) - statutory requirements and corporate governance codes - capital markets can tapped (raising legal capital or IPO’s) - freedom of contracts is severely restricted by statutory law in order to protect creditors and minority shareholders (cf.shareholders’ agreements) ►Legal Materials of the European Union - Second Company Law Directive (Minimum Capital for (Non-) Listed Corporations (Public Limited Companies) - Regulation on the Societas Europaea (EC 2157/2001) Shareholders’ Agreements
CHOICE OF FORM V Private Corporations Limited Liability Companies GmbHs) smaller and mid-sized (family businesses (consider Germany) limited number of shareholders de facto limitation on transferability of shares(pre-emptive rights of remaining shareholders) by articles of association or shareholders agreement signed by all shareholders Members control management of the company more directly Access to capital markets is problematic CESLELECTIVE-APRIL2016 24
CESL ELECTIVE - APRIL 2016 24 CHOICE OF FORM V ►Private Corporations & Limited Liability Companies (GmbH’s) - smaller and mid-sized (family) businesses (consider Germany) - limited number of shareholders - de facto limitation on transferability of shares (pre-emptive rights of remaining shareholders) by articles of association or shareholders’ agreement signed by all shareholders - Members control management of the company more directly - Access to capital markets is problematic
Capital Structure(Legal Capital -Europe >EU 2nd Company Law Directive minimum capital 25, 000 e 2 Rules relating to the raising of capital through the issuance of shares the maintenance of share capital and the return of value to the shareholders capital maintenance requirements shall not be infringed ( ferran). aPay up shares in cash(including a release of a liability for a liquidated sum or a credit equivalent to payment in cash No issue at a discount (know-how, patents, non-cash consideration No undertakings for future activity as consideration france:e37000/225000 US: No 'stated capital, no legal capital Germany: (50000 y Balance sheet Uk:￡50000 >Net assets test CESLELECTIVE-APRIL2016 25
CESL ELECTIVE - APRIL 2016 25 Capital Structure (Legal Capital -Europe) ►EU 2nd Company Law Directive minimum capital 25,000 € ►Rules relating to the raising of capital through the issuance of shares, the maintenance of share capital and the return of value to the shareholders capital maintenance requirements shall not be infringed (Ferran). ▪Pay up shares in cash (including a release of a liability for a liquidated sum or a credit equivalent to payment in cash) ▪No issue at a discount (know-how, patents, non-cash consideration) ▪No undertakings for future activity as consideration US: No ‘stated capital’, no legal capital ►Balance sheet ►Net assets test France:€ 37000/225000 Germany: € 50000 UK: £ 50000