LEGAL REGULATION OF GROUPS OF COM PANIES’ ACTIVITIES IN THE EU AND THE UK

Abstract

This article examines how corporate law treats legal entity boundaries, general group interest, and de jure and de facto control in groups of companies.

A group of companies is considered a parent company, and its subsidiaries, branches, and representative offices are linked by control relationships. The main approaches to the legal regulation of the activities of companies groups in the EU member states and the United Kingdom have been identified.

Investigating the treatment of this question in key EU and the UK jurisdictions over time reveals an overlooked development in Ukrainian corporate law.

EU corporate law rules of governance and the court practice increasingly overcome entity boundaries and apply on a pass-through basis, such as allowing shareholders of a parent company to sue subsidiary directors, inspect subsidiary books and records, and approve major asset sales by subsidiaries. It reflects a gradual trend and can be described as the rise of “entity transparency”, investors’ and creditors’ protection in EU corporate law.

Modern corporate legislation and case law recognize the separate corporate legal personality of a legal entity and its participants (shareholders), based on the separation of the assets of the corporation and the shareholders. Moreover, there appears to be little direct correlation between a jurisdiction’s willingness to ignore the limits of corporate autonomy to ensure shareholder rights, on the one hand, and to hold the parent company and directors of a subsidiary liable for losses suffered by shareholders and creditors, on the other. The U.K. is a leader in entity transparency in corporate law, but is comparatively reluctant to curtail shareholders’ limited liability within the framework of the “lifting the corporate veil” doctrine.