Is a Delaware effect developing within the European Community?
Abstract (Summary)The inner market of the European Community is developing and as a part of this company law and the freedom of establishment are doing the same. Some of this development is carried out through case law from the European Court of Justice as well as through Community harmonisations. As this has happened some worried voices has been raised arguing that a development similar to that in the USA, known as the Delaware effect, might occur. There has been some development indicating such development; companies have made use of the freedom of establishment to seek a more favorable legislation and Member States have changed and adapted their legislations. An example is the lowering of the minimum paid-up capital for limited liability companies that has oc-curred.In this paper the Delaware effect is investigated in order to clarify what it is and how it has developed. This knowledge is vital to be able to se if a Delaware effect might be developing within the European Community. There has been a large discussion on the Delaware effect in the USA and it is evident from that discussion that there are scholars arguing in several directions and that it is in-conclusive whether or not the Delaware effect is detrimental to shareholders, companies and others.In this paper it is argued that, as it is questionable what the Delaware effect en-tails in the USA it is even more questionable to talk about a Delaware effect within the European Community. The Member States are to some extent re-stricted, due to Community harmonisations, as to what they can do in order to compete for incorporations. Companies are also hampered in their attempts to make use of the freedom of establishment, especially companies already incor-porated in a MS. It is also argued that there is a lack of incentives and possibili-ties for both Member States and companies to facilitate a competition for company law.Adding these components together, the preconditions within the European Community are not suitable for a Delaware effect or a European Community Delaware to emerge. The continued development of the freedom of establish-ment along with the companies increased understanding of its benefits might create incentives to seek more favorable legislations, but it is highly unlikely that a Member State will emerge to be as successful as Delaware.
School:Högskolan i Jönköping
Source Type:Master's Thesis
Date of Publication:01/28/2008