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The Possibility of Prioritization of a Parent Company´s Interests in a Corporate Group

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  • Jiří Chaloupka

Abstract

The purpose of this article is to compare laws regulating corporate groups in Germany, the United Kingdom and France in order to find the optimal model of regulation of corporate groups and then to compare the findings with the proposed Commercial Corporation Act. Generally, the difference between the concepts lies in the approach to the issue of respecting or not respecting the duty of loyalty within corporate groups. Under certain conditions, German law enables a parent company to promote interests of the whole group at the expense of a subsidiary. It creates a system of specifi c rules in order to comprehensively regulate such interferences of the parent company and thus to protect the subsidiary. On the other hand, British law insists on compliance with the duty of loyalty and equips minority shareholders and creditors with legal means for their protection. French law represents a compromise between these approaches as it allows promotion of interests of the whole group at the expense of a subsidiary only under strict conditions. However, if these conditions are met, it enables the parent company to promote its interests in an even broader way than German law does. It also provides minority shareholders and creditors with direct protection. In French law on corporate groups, jurisprudence plays an important role which enables a flexible response to developments in the economic sphere. Thus, on the one hand, French law enables the parent company to effectively manage the corporate group as an economic unit and, on the other hand, it provides endangered subjects with functional instruments of protection. For this reason, the French approach can be recommended. The proposed Commercial Corporation Act is inspired by the French model, which can be evaluated as positive.

Suggested Citation

  • Jiří Chaloupka, 2012. "The Possibility of Prioritization of a Parent Company´s Interests in a Corporate Group," Acta Oeconomica Pragensia, University of Economics, Prague, vol. 2012(6), pages 34-51.
  • Handle: RePEc:prg:jnlaop:v:2012:y:2012:i:6:id:386:p:34-51
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    More about this item

    Keywords

    Corporate groups; company law; comparative analysis;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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