page_title: European Union law
section_title: Companies and investment
hierarchical_section_title: European Union law / Social and market regulations / Companies and investment
caption_attribution_description: View of the Deutsche Bank building from The Domain park in Sydney, Australia.
context_page_description: European Union law is a system of rules operating within the member states of the European Union. Since the founding of the Coal and Steel Community after World War II, the EU has developed the aim to "promote peace, its values and the well-being of its peoples". The EU has political institutions, social and economic policies, which transcend nation states for the purpose of cooperation and human development. According to its Court of Justice the EU represents "a new legal order of international law".
  The EU's legal foundations are the Treaty on European Union and the Treaty on the Functioning of the European Union, unanimously agreed by the governments of 27 member states. New members may join, if they agree to play by the rules of the organisation, and existing members may leave according to their "own constitutional requirements". People are entitled to participate through the Parliament, and their national governments in shaping the legislation the EU makes.
context_section_description: Like labour regulation, European corporate law is not a complete system and there is no such thing as a self-standing European corporation. Instead, a series of Directives require minimum standards, usually protecting investors, to be implemented in national corporate laws. The largest in Europe remain member state incorporations, such as the UK "plc", the German "AG" or the French "SA". There is however, a "European Company" (or Societas Europaea, abbreviated to "SE") created by the Statute for a European Company Regulation 2001. This sets out basic provisions on the method of registration (e.g. by merger or reincorporation of an existing company) but then states that wherever the SE has its registered office, the law of that member state supplements the rules of the Statute. The Employee Involvement Directive 2001
  also adds that, when an SE is incorporated, employees have the default right to retain all existing representation on the board of directors that they have, unless the negotiate by collective agreement a different or better plan than is provided for in existing member state law. Other than this, most important standards in a typical company law are left to member state law, so long as they comply with further minimum requirements in the company law directives. Duties owed by the board of directors to the company and its stakeholders, or the right to bring derivative claims to vindicate constitutional rights, are not generally regulated by EU law. Nor are rights of pre-emption to buy shares, nor rights of any party regarding claims by tort, contract or piercing the corporate veil to hold directors and shareholders accountable. However, Directives do require minimum rights on company formation, capital maintenance, accounting and audit, market regulation, board neutrality in a takeover bid, rules on mergers, and management of cross-border insolvency. The omission of minimum standards is important since the Court of Justice held in Centros that freedom of establishment requires companies operate in any member state they choose. This has been argued to risk a "race to the bottom" in standards, although the Court of Justice soon affirmed in Inspire Art that companies must still comply with proportionate requirements that are in the "public interest".
  Among the most important governance standards are rights vote for who is on the board of directors for investors of labour and capital. A Draft Fifth Company Law Directive proposed in 1972, which would have required EU-wide rights for employees to vote for boards stalled mainly because it attempted to require two-tier board structures, although most EU member states have codetermination today with unified boards. The Shareholder Rights Directive 2007 requires shareholders be able to make proposals, ask questions at meetings, vote by proxy and vote through intermediaries. This has become increasingly important as most company shares are held by institutional investors (primarily asset managers or banks, depending on the member state) who are holding "other people's money". A large proportion of this money comes from employees and other people saving for retirement, but who do not have an effective voice. Unlike Switzerland after a 2013 people's initiative, or the U.S. Dodd-Frank Act 2010 in relation to brokers, the EU has not yet prevented intermediaries casting votes without express instructions of beneficiaries. This concentrates power into a small number of financial institutions, and creates the potential for conflicts of interest where financial institutions sell retirement, banking or products to companies in which they cast votes with other people's money. A series of rights for ultimate investors exist in the Institutions for Occupational Retirement Provision Directive 2003. This requires duties of disclosure in how a retirement fund is run, funding and insurance to guard against insolvency, but not yet that voting rights are only cast on the instructions of investors. By contrast, the Undertakings for Collective Investment in Transferable Securities Directive 
caption: The Shareholder Rights Directive 2007 requires proxy vote instructions are followed. There EU has not yet acted, as have the Swiss, to prevent asset managers or banks like Deutsche Bank casting votes on company shares bought with other people's money, and to empower the ultimate investors.[344]
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