We conjecture that venture capitalists and their investors often fall prey to what is known as ‘collective conservatism’. We investigate this conjecture by analysing boilerplate provisions in limited partnership agreements. When investors accept suboptimal boilerplate provisions it is not because they believe that the standardised terms and conditions sufficiently align the interests of investors and fund managers, but merely because they think their peers, including their competitors, prefer to include them in the limited partnership agreement. We find that the financial crisis has facilitated some notable deviations in the boilerplate provisions that are designed to facilitate the return of confidence in the venture capital industry. We argue that a gradual shift may be taking place towards more investor-favourable limited partnership agreements or separate account and pledge fund arrangements. These shifts — which do not lead to significant changes in limited partnership agreements — appear to be particularly effective for bigger funds that increasingly focus on later-stage investments. We show that early-stage funds are more inclined to enter into innovative collaborative agreements. Collaborative agreements differ from traditional limited partnership agreements in that they focus less on curtailing principal-agent problems and more on joint development and value creation.

More and more companies appear with strange abbreviations behind their business name. Consider Chrysler Group LLC (instead of Inc.) or LVMH Montres & Joaillerie France SAS. Some even speak about the ‘endangered corporate form’ and point to the rise of the uncorporation. This primer examines how the uncorporation has evolved in the United States and, more recently, in other economies around the world. We find that the growth in non-listed business forms in Europe, Latin America and Asia has been shaped by a mixture of learning and professional advice arising from the company law review process, as well as by the indirect influence of overseas business forms. We examine the main components of uncorporate business forms that are responsible for limiting transaction costs, curbing opportunism and creating organisational structures that are compatible with entrepreneurial expectations. We show the main differences between the partnership-type and corporatetype uncorporations, particularly the LLC in the United States (US-LLC), the SAS in France and Colombia, and the LLP in the United Kingdom (UK-LLP), Singapore (S-LLP), India (I-LLP) and Japan (Yugen Sekinin Jigyou Kumiai, J-LLP). We find that, given the pitfalls in the evolution of uncorporation laws, an international Model Act would be consistent with lower transaction and information costs and could help to encourage cooperation between firms situated in different jurisdictions.

Hedge funds and private equity increasingly play an important role in the financial services industry and corporate governance in Europe and the United States. Activist hedge funds and private equity firms have developed similar investment strategies that are designed to influence the corporate governance and organisational structure of publicly listed companies. A large number of hedge funds, for example, have adopted an investment strategy to accumulate large positions in publicly listed companies, using their ownership positions to engage in monitoring of management. Activist hedge funds often make direct interventions in the corporate governance of target firms, confronting management teams by demanding specific actions, such as changes in management, company capital structure, dividend policy and company strategy, in order to increase shareholder value. The investment strategy of private equity buyout funds is to target publicly listed companies which they can take private for a period of restructuring and governance changes. Eventually, the firm will either be returned as a publicly listed company or be sold to a strategic buyer or another investor. Activist hedge funds and private equity firms have recently come under scrutiny by regulators who are concerned about the effect of the strategies used by these funds on the companies in which they invest and the capital markets in which they operate. Existing accounts focus on the mechanisms in corporate law, taxation and labour law to address current practices of hedge fund and private equity firm managers. We examine the circumstances where direct government regulation could be supplemented with a mix of self-regulatory and co-regulatory strategies. We conclude by analysing the various regulatory responses to the propensity of activist hedge funds and private equity firms to act in concert and assess whether the reforms will have practical significance.

Lower barriers of entry for new firms and more flexibility in structuring a business organisation are the two key factors motivating the introduction of the new company law. In general, policymakers use new company law initiatives to encourage entrepreneurship, innovation and cooperative arrangements. This paper distinguishes the diverse strands of company law reforms arising in the United States, Europe and Asia and points to the underlying conditions that shape the markedly different reform outputs. Our analysis points to three important factors – (1) private ordering; (2) fiscal transparency; and (3) limited liability – that effect the incentives for new firm creation. However, we find that many of the new company law reforms are incomplete. Nevertheless, these new company law reforms retain the ability to generate rents due to their adaptability and responsiveness to social and economic change.

This comment focuses initially on the way in which cross-border mobility plays a central role in shaping creditor protection regimes across the European Union. We conclude with some preliminary observations about the European Insolvency Regulation and the potential impact of forum shopping on creditors and firms.

This paper evaluates the primary legal and financial mechanisms that help support the development of a venture capital market. Specifically, we argue that emulating the organization and contractual pattern of the US venture capital market could enhance the development of the European venture capital market. We first show that the modernization of the ‘venerable’ limited partnership form, based on US experiences, offers substantial contracting benefits for investors and is crucial to the operation of a mature venture capital market. We then argue that the emergence of more efficient limited partnership structures can emerge from jurisdictional competition between European states. We argue that the United Kingdom, which has recently embarked on general and limited partnership law reform, could, in light of the competitive lawmaking environment that the ECJ has opened up, be in the best position to enter the competition within the EU. It then explores the prominent features of the UK special Limited Partnership statute, which makes it possible for venture capitalists to organize their contractual relations that are best suited to the characteristics of the venture capital market. Finally, our analysis provides an understanding of the competitive forces that shape legal change, which has implications for the ongoing debate in Europe over the reform of limited partnership law and related business forms.

This volume arose out of an October 2003 Conference on Corporate Reorganizations and Bankruptcy organized by the Faculty of Law and Center for Company Law at Tilburg University. The principal focus of the issue is corporate governance and bankruptcy reform, but also highlights the European Company (SE) and the theory and practice of cross-border reorganizations and inter-state competition in corporate structures. The special issue has four major sections.

Despite recent developments in ECJ case law, the ability of EU firms to choose among different Member State corporate law regimes is quite limited. At the same time, however, Member States have started to show an interest in providing competitive business forms, and firms seem keen to use them. Against this background, the ongoing review of EU company law and takeover law can be seen as an attempt to complete the set of minimum requirements that establish a limit for the ‘race to the bottom’. This paper suggests that, unfortunately, many of the proposed harmonization measures in the Commission's Action Plan are unlikely to benefit firms and investors and will promote costly bureaucratic uniformity. Indeed, as currently structured, the proposals regarding disclosure, board structure and director liability have limited merits. Moreover, reforms aimed at the establishment of a permanent structure providing advice on future EU regulatory initiatives and requiring Member States to adopt director disqualification mechanisms are likely to result in excessive regulatory intervention. Similarly, many provisions of the proposed Takeover Bids Directive can be expected to hamper rather than enhance the development of a competitive, cross-border market for corporate control. By contrast, the authors recommend regulatory changes that facilitate private litigation, as this may limit regulatory biases and contribute to disciplining managers and gatekeepers. Finally, the authors endorse a default arrangement for takeovers that would allow firms to choose to be governed either by the proposed Takeover Bids Directive or by existing Member State law. The move towards more choice should challenge regulators to provide more cost-effective rules.