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As far as opening of insolvency procedures is concerned, the governments of the countries that are centres of the debtors vital interests have jurisdiction over them. The approach is based on the assumption that for a company or any other legal person the centre will be in the country where it has its registered (or established by the constitution) office. In such cases the insolvency legislation of the country where the proceedings were initiated should apply. Nevertheless, the Convention permits of initiating insolvency proceedings under two and more jurisdictions i.e. under different laws applied to one bankruptcy case. Consequently the law of universalism (i.e. one law covering the entire case) is not applied in such cases, which inevitably brings about legal conflicts.

The Convention defines that an insolvency case initiated in accordance with the law should be recognized by all the countries signatories and have there the same legal.

Directive 80/987/EEC of 20 October 1980 (Francovich Directive) deals with protection of employees in cases of the employer insolvency.47 Failure to observe the Directive resulted in the European Court ruling on legal cases C-6 and 9/90, Francovich and Boniface v. Italian Republic [1992] ECR 113). A certain Italian company initiated a process its liquidation in view of insolvency OJ L 1980 283/23.

Policy Paper RECEP Alexander Radygin, Revold Entov UNIFICATION OF CORPORATE LEGISLATION:

WORLD TRENDS, EU LEGISLATION AND RUSSIAS OUTLOOK and left the suer without wages he was due. Italy lacked compensation schemes for such situations and the became the grounds for the writ to the government to satisfy the requirement.

Chapter 3. Russias corporate legislation and perspectives of applying the EU experience 3.1. Reception and general tendencies in development of company legislation in the period of transition The second half of the 80 90s of the XXth century is characterized by a wide-scale borrowing of legal rules, of the EU first of all, by transition economies. Of course, transitional economies are a separate case, as here the issue is not convergence but an objective borrowing of the above models (their elements) or rebuilding of the historically developed legal system of the country. So far, the German model has been most widely accepted (at the law level) by the transitional economies in Europe (see also Radygin, Entv, 1999).

Nevertheless, the situation has been complicated by many new objective and subjective problems.

In the most general terms the basic institutional problem lies in the specific nature of a transitional economy as non-cyclical systemic swing in the economic development (Kuznetsov, 1994, pp.56). The institution of corporate governance, being such a principally new institution, not only bears the burden of the systemic swing but also directly depends on the situation with the other emerging institutions, tendencies in the reform and society development.

Among the most important specific problems characteristic (in this particular context) of most of the transitional economies and creating additional difficulties to forming models of corporate governance and control the following ones merit special attention:

relatively unstable macroeconomic and political situation; - weak financial situation of a considerable number of newly established corporations;

- underdeveloped and overall contradictory legislation;

- extreme weakness of the infrastructure needed to enforce corporate legislation;

- dominance of large corporations and the problem of monopolism;

- in many cases a considerable initial diffusion of share ownership;

- special role played by managers (directors) in corporate control;

- on-going struggle for control over corporations and, consequently, instability of the ownership rights system;

- social and political barriers to carrying out real bankruptcy procedures of loss-making corporations;

- weak and non-liquid (low-liquid) markets of corporate securities;

For obvious reasons the paper can not provide a review, even a short one, of the general macroeconomic and political problems affecting, in one way or another, the situation in the area of corporate governance (see: Glinkina., 2002).

Besides, as mentioned above, corporate governance model is sufficiently resistant to radical modifications and any such influence can be normally indirect only (it becomes stronger under conditions of unstable economic and political situation of the transitional period).

Policy Paper RECEP Alexander Radygin, Revold Entov UNIFICATION OF CORPORATE LEGISLATION:

WORLD TRENDS, EU LEGISLATION AND RUSSIAS OUTLOOK - underdeveloped system of financial institutions;

- problem of transparency of issuers and markets related to the wide range of other problems (effectiveness of the tax system, etc.);

- consequent lack (weakness) of external control over managers of the former state-owned companies;

- weak internal (national) and fearing additional risk external (foreign) investors;

- lack (loss) of traditions of corporate ethics and culture;

- retaining a considerable share of property by the state;

- corruption and other criminal aspects.

Naturally, none of the transitional economies has corporate governance legislation (in the wide meaning of the term and taking into account all the interrelated legal acts) that could be viewed as a well-developed one. The legislation that does exist reflects what should exist or, in the best of the circumstances, what is emerging rather than what is already in place...It is something resembling the first stage of law development..., but it benefits from the fact that it can draw on the international experience and thus avoid the period trial and error...In this case, priority of the continental law is undisputable which, however, does not exclude a possibility of using certain good solutions offered by the English-American law... (Corporation..., 1995, Ch.VIII-IX).

Table 2. Standard elements of corporate legislation and their presence in some transition economies, 90s. * Russia Czech Hungary Bulgaria Poland Romania Republic Legislative acts Civil code Commerci Law VI Commerci Commerci Act On (1994), al code On al law al code business law On (1991) business (1991, (1934 with societies Corporatio societies 1994) amendmen (1990) n (1995) (1988) ts) based on the Commerci al code of (1) Clear-cut Weak Present Present Weak Present Weak responsibilities for decision-making (2) Management Two-tier if Two-tier Two-tier Depends Two-tier if Depends structure (one or the number always always on decision share on decision two-tier, i.e. board of by capital by of directors and shareholde shareholde exceeds 0. shareholde supervisory board rs is over rs 5 mln zloty rs (3) Appointment of Over 50 % Over 50 % Over 50 % Over 50 % Not fixed, Boards directors (votes some can competenc required); be e appointed by large shareholde rs (4) Removal of Over 50 % Over 50 % Over 50 % Over 50 % Over 50 % Over 50 % directors (5) Control over Present Present Present Present Present Present voting right (by Policy Paper RECEP Alexander Radygin, Revold Entov UNIFICATION OF CORPORATE LEGISLATION:

WORLD TRENDS, EU LEGISLATION AND RUSSIAS OUTLOOK proxy)** (6) Information High level Low level High level Low level High level Low level discloser rules and (close to audit; that of EU) (7) Rights of minority shareholders:

() preemption Present Present Present Present Present n/d right of buying shares;

(b) qualified 75 % 66 % 75 % 2/3 Can be 2/3 (higher) majority of the 50%, 2/3, % of the for making authorized 3/4, 4/5 quorum important cpital decisions;

(c) takeover rules; Present None Present None n/d n/d (d) cumulative Present n/d n/d n/d Present n/d voting;

(e) limited number n/f Can be Can be n/f Can be Can be of voted per shareholder (8) Employees n/f 1/3-1/2, if 1/3, if n/f n/f n/f participation in number of number of supervisory board employees employees exceeds 50 exceeds (9) Minimum for Over 50 % 30 % Over 50 % n/f 50 % the general meeting quorum (10) Number of Normally, 1 Not limited 1 From 1 to votes per share 1 (11) Ban on insider Present Present Present Present Present Present deals (12) - Enforcement weak weak weak weak weak Weak of the above norms * n.d. no data available, n/f no provision found in the legislation. The information might be outdated.

** actually depends () on rules of access to shareholder registers (b) prospects of establishing a system of depositories similar to the German one (where deposit banks vote for shareholders who express no opinion on the issues raised at the general meeting. The latter is in contrast with the US rules where such votes are nullified).

Sources: RF legislation; Bohm A., ed., 1997; Grey, Hanson, 1994; Corporation, 1995; EBRD, 1998.

Although a certain standard set of corporate norms is present in majority of legal systems of transition economies (Table 2), the range of emerging models is very wide and covers most contradictory approaches:

- on the one hand, predominant orientation towards increasingly complex and detailed corporate legislation alongside the development of real processes and practices of corporate control (so far this happens in the countries that were the first to start privatization - Russia, Lithuania, Czech Republic, Poland, Hungary);

- on the other hand, the concept of the state moving completely away from the corporate governance problem. As an example, one can take Estonia where the main emphasis was made on a combination of concentrated ownership as the basic panacea and the policy of an indirect regulation by the state (competitive environment, taxes, introduction of international standards of financial reporting and accounting to provide a real access to the information and exercising control over activities of the board of directors). The approach is Policy Paper RECEP Alexander Radygin, Revold Entov UNIFICATION OF CORPORATE LEGISLATION:

WORLD TRENDS, EU LEGISLATION AND RUSSIAS OUTLOOK evident in treatment of the government minority blocks of shares that private shareholders are allowed to dilute without fear of any consequences or sanctions.

In the mid -90s more original general interpretations of the concept of corporate governance and state regulation were known. For example, in Ukraine corporate governance and regulation policy in the area were interpreted in the following way:

- social protection of citizens and employees (sanctions against legal entities and managers violating social liabilities of the company);

- an increase in the role played by employees in the corporate governance;

- widening of the rights of the state as an owner.

In a similar way the problems of corporate governance were perceived in Slovakia. An increase in the role played by employees and retention of the states role were considered as first priority tasks.

In Uzbekistan, corporate governance was interpreted as principles of relations between PLCs and branch ministries. An attempt to analyze the formal ways of developing the relevant legislation (principles of codification of corporate law) shows that the countries under review can be classified as different groups. 50 Obviously, to a considerable extent this is a result of a traditional influence of the pioneer countries in Europe - France (Civil and Commercial Codes of napoleon of 1804-1807) and Germany (Bismarks Commercial Code of 1897).

The basic divide is normally provided by availability in the country of traditions of civil law (France, Germany and dependent countries) or common law (England, USA and dependent countries). Given the predominant influence of the Roman law, different authors identify from two to four by-country models: (1) Romano-German (continental, codified, source - law) and EnglishAmerican (insular, common law, without law branches, source a judicial precedent); (2) French, German and English-American; (3) French, German, Scandinavian and English-American.

Continental Europe, like Russia uses universally adopted division of law into public law (organization of the state and its relationships with private persons) and private law (regulation and protection of interests of private persons). Private law, in its turn, is divided into two main parts:

civil law (general rules regulating relationships between private persons) and commercial law (relationships between private persons receiving profit). Commercial partnerships (business partnerships and companies) are viewed as falling within commercial law, while corporations in their turn are viewed as belonging to the category of commercial partnerships (business partnerships and societies). Some countries of Romano-German orientation are characterized also by the so-called dualism of private law availability of both Civil and Commercial Codes (France, Germany, Spain, Greece, Turkey, Japan). Monistic private law (i.e. regulation of norms of commercial law within the framework of a single Civil Code) is characteristic of Switzerland, Italy, some other countries, and is adopted in Russia.

The evaluation was performed on the basis of an analysis of the 1996 official reports by representatives of those countries to the CEEPN conferences. see.: Bohm, ed., 1996-1997.

For more detail on classification see: Bogatykh, 1996, pp. 9-33; Basiliev, 1993; La Porta, Lopez-de-Silanes, Shleifer, Vishny, 1997.

The trend to single out commercial law as a separate branch, in spite of the traditional system of common law, was registered in the English-American system in the middle of the XX century. Those countries adopted, a number of acts aimed to simplify and modernize law and to repeal outdated precedents (Bogatova, 1996, pp.25-26). For example, in England one of such acts was the Company Law of 1985 and in the USA a standard Law on Business Corporations adopted in many states of the USA.

Policy Paper RECEP Alexander Radygin, Revold Entov UNIFICATION OF CORPORATE LEGISLATION:

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