Karsten Engsig Sørensen

New EU Directive on the Disclosure of Non-Financial Information (CSR)

In October 2014 the EU adopted new rules on the disclosure of non-financial information, otherwise known as corporate social responsibility (CSR) information. The new requirements bring the CSR disclosure regulation in the EU in line with the current best practices and constitute a huge step forward compared to the existing rules on the disclosure of non-financial information.This article analyses the likely impact of the amended Accounting Directive; its scope of application, what should be disclosed and how the directive should be enforced. In doing so, the article compares the new requirements to current best practices and experiences, especially using the experiences with mandatory CSR reporting in Denmark and the experiences with corporate governance reporting in the EU. Based on these experiences the article also makes predictions of whether the new requirements are likely to increase the quantity of the non-financial information disclosed and the consistency and comparability of the reports.

Disclosure in EU Corporate Governance — A Remedy in Need of Adjustment?

A large number of new rules which rely on disclosure requirements have been introduced in EU corporate governance in recent years, to the extent that disclosure requirements seem to be the predominant if not the only regulatory method used. This article takes a critical look at this development with the aim of assessing whether too much reliance has been put on disclosure as a regulatory instrument in this area. The arguments in favour of disclosure requirements are studied, as are those situations where disclosure is most likely to prove an ineffective or insufficient tool. Furthermore, it is examined how the current disclosure regimes in EU corporate governance can be improved to ensure that they will be more effective.

Promoting Entrepreneurship - the New Company Law Agenda?

Promoting entrepreneurship is high on the agenda at both European and national level. This is, e.g., reflected in a number of company law initiatives, which have mainly focused on creating easier and cheaper access to limited liability, for example, by introducing sub-types of the private limited company. The main questions addressed here are whether it is possible to promote entrepreneurship through company law reforms and what the content of such frameworks should be in order to meet the needs of entrepreneurs. The analysis takes its point of departure in a new Danish survey of what the content of company legislation should be in order to meet the needs of entrepreneurs. In line with existing empirical studies, the importance of the capital requirement and formation procedures and costs is analysed, and further insight is given into, for example, what level of minimum capital and cost is regarded as acceptable. Besides this insight, the Danish survey adds to the existing studies and literature by also shedding light on whether company laws can be further optimised, for instance, by introducing more flexible rules for company management, etc. The results of the survey are compared with the reforms which, in recent years, have been adopted in several EU Member States, with the aim of evaluating whether these have met the needs indicated in the survey. The overall conclusion is that this is not the case on all points and that there is thus room for improvement. It is also briefly discussed whether the different reform methods used in the recent national reforms are well-suited for further optimising the legislation and it is shown that the method of introducing sub-types of private limited companies has its limitations.

Duty of Loyalty of Shareholders - A Possible Remedy for Conflicts in SMEs?

In most European jurisdictions it is discussed whether shareholders must observe a duty of loyalty towards the company and/or towards other shareholders. This paper traces the origin and evolution of a more general duty of loyalty in Germany, Denmark, the UK and the USA. Even though the duty is not so well developed in Denmark and the UK, it does appear that both in theory and in practice there are reasons for believing that such a duty of loyalty can develop. In order to assess what such a duty of loyalty can lead to in terms of duties for shareholders, it is natural to look at the practice in Germany and the USA, where the duty has been in existence for many years, and whether there is a comprehensive case law. One of the areas where the duty of loyalty is most easily accepted and its impact is most obvious is in the case of SMEs. Therefore the consequences of such a duty of loyalty in the typical SME is illustrated and analysed. Among other things, it can be seen that the duty has meant that shareholders can be subject to a prohibition on competition with the company and a prohibition on usurping the company’s corporate opportunities. To the extent that there is trading between the company and a shareholder, the shareholder must ensure that such transactions are carried out on market terms. Finally, there can be a duty of confidentiality and a duty to inform fellow shareholders about certain circumstances.

Non-Financial Reporting, CSR Frameworks and Groups of Undertakings – Application and Consequences

ABSTRACT The recently adopted Directive on non-financial reporting (Directive 2014/95/EU) and several CSR frameworks are based on the assumption that groups of undertakings adopt, report and implement one group policy. This is a very important but also rather unique approach to groups. This article first shows how the Directive as well as a few CSR frameworks intend to be implemented in groups and next it discusses potential barriers to do so. Even though company law does not always facilitate the adoption, communication and implementation of a group CSR policy, it may not in practice be a problem to do so. However, it is shown that doing so may have unforeseen consequences for the parent undertaking. To avoid them, it is recommended to make adjustments to the implementation of the group policy.

Social Enterprises: How Should Company Law Balance Flexibility and Credibility?

In recent years, many countries have introduced special regimes to facilitate the organisation of social enterprises. Many of these include company law rules which may either provide for a special corporate form for social enterprises, or are part of a certification scheme for such enterprises. This article analyses how these company law issues have been addressed. It focuses on the US benefit corporation, the UK Community Interest Company and the recently proposed Danish certification regime for social enterprises. An analysis is made of how the different systems aim to find the right balance between flexible rules that are sufficiently attractive to entrepreneurs and (social) investors, and rules which ensure that the designation of ‘social enterprise’ is credible. It is pointed out that the three systems balance these requirements quite differently, and the advantages and disadvantages of each are discussed. One of the key elements in the governing of social enterprises is the regulation of how assets can be transferred from these enterprises. It is concluded that a certification scheme seems preferable to a new corporate form, and several recommendations are made as to how to find a system that is more credible than the US solution and more flexible than the UK and Danish solutions.

Regulating Different Trading Venues – The European Experience Based on MIFID

The rise of alternative trading systems has created a dual system, with heavily regulated exchanges on the one hand, and almost unregulated alternative trading systems on the other hand. The European Union has responded to this development by enacting Directive 2004/39/EC on markets in financial instruments (MiFID). Evidence has shown that the MiFID regulation has increased competition between trading venues within Europe and substantially lowered the costs of trading. This paper analyses to what extent MiFID actually has created a level playing field between the different trading venues and to what extent investors are adequately protected when trading on different venues.

Competition and Co-operation between Stock Exchanges in Europe – Legal Aspects and Challenges

In the last two decades there have been many examples of co-operation between national stock exchanges in Europe. However, most of these have been cooperation on a very low scale. Starting in 2000, this pattern seems to have changed. Stock exchanges have committed themselves to “alliances”, or even “mergers”, entailing a co-operation which is far more intensive than most former examples of co-operation. In the last couple of years many such alliances have been formed, some have been dissolved, and even more have been considered.