The Forced Evolution of Corporate Law Rules
ANGELO BORSELLI HIGHLIGHTS CHANGES INDUCED BY THE PANDEMIC ACROSS EUROPEFacilitating remote meetings of company boards and other governance bodies, loosening the duties and responsibilities of directors, and supporting the liquidity of companies are the three main areas in which European governments have intervened to adapt corporate law to the pandemic crisis. However, there was a lack of coordination over such interventions at the EU level.
This is what is suggested in the article “Corporate Law Rules in Emergency Times Across Europe” by Angelo Borselli (Academic fellow, Bocconi University) and Ignacio Farrando Miguel (Pompeu Fabra University), published in European Company and Financial Law Review. The paper is a comparative analysis of the experiences of the United Kingdom, Germany, France, Italy and Spain, and others.
“Most European states have introduced rules to facilitate the conduct of virtual assemblies, as a consequence of the measures of social distancing,” observes Borselli. “In some cases, part of the duties of chief executives have also been relaxed, in light of the extraordinary challenges and uncertainties that they have found themselves facing. This was also done to prevent the COVID-19 crisis from triggering a chain of liquidations or insolvencies”. For example, in the United Kingdom the wrongful trading regime was suspended, in Germany the exemption from liability for payments made for ordinary business was provided, in Italy and Spain there was the suspension of the recapitalize or liquidate rule.
On the front of measures to support the liquidity of companies, Borselli comments that, “while substantially all governments have restricted the distribution of dividends for companies benefiting from state support, certain states have also introduced rules to favor the inflow of resources to companies.” In Italy, for example, action was taken to suspend the deferment of shareholder loans (as in Germany and Spain) but also to facilitate recapitalizations.
“The urgency imposed by the pandemic has given a push to reconsider some hitherto untouchable rules of corporate law,” concludes Borselli. “It will be interesting to see to what extent these emergency interventions will turn into permanent regulations. An example in this sense already comes from Germany and concerns the lasting exemption from liability for payments made in the conduct of ordinary business, while in Italy the suspension of the recapitalize or liquidate rule has been extended to 5 years, for the losses recorded at the end of 2020”.
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by Camillo Papini
