The purpose of this thesis is to examine the consequences of the legislative proposal L 190, regarding a possible abolishment of the Danish entrepreneurial limited company (IVS) with a minimum capital requirement off DKK 1 and limited liability. The legislative proposal is based on a rapport by The Danish Business Authority about the use of IVS. By applying legal, comparative and economic analysis, this thesis will result in welfare analysis that will conclude, whether the IVS should be abolished, or the rules should be adapted with inspiration from other EU countries legislative where it is possible to start an IVS.
This thesis has analyzed the legislator's argument that the low capital requirement and limited liability entail an increased risk of fraud and abuse, as well as the opposition's argument that the rules should merely be adapted with inspiration from other countries' legislative who offers entrepreneurial companies instead of being abolished. The legal analysis concluded, that there is no legal basis for entrepreneurial limited companies to be preferred as a corporate form of fraud or to increase the risk thereof, by examining liability and tort rules in an IVS, a limited liability company (ApS) and a sole proprietorship. On the other hand, it is concluded that regardless of the purpose of founding a company is fraud, or simply taking the risk of starting a business foundation, it must be deduced from the capital requirement and limited liability that an entrepreneur's preferred company must be an entrepreneurial company.
In the comparative analysis, legal rules of Germany, Belgium, Luxembourg and Italy was compared with Danish rules regarding entrepreneurial limited company especially how these countries has regulated the absence of minimum capital requirement and limited liability, and it was concluded that some rules in Luxembourg and Belgium were found able to potentially optimize the use of entrepreneurial limited companies, in relation to the presented problems in the legislative proposal L 190. In continuation of the legal analysis and the comparative analysis of the applicable law, the economic analysis examined, using game theory, how liability and tort rules affect an entrepreneur's incentives in selecting a company form and using hereof. It was also examined whether Luxembourg and Belgium's rules would affect the incentive of entrepreneurs in their choice of company and which rules would potentially optimize the use of the Danish IVS best.
By comparing the equilibria outcome of the games, the Kaldor-Hicks efficiency analysis proved that Belgium’s rules proved to be most efficient, from a welfare perspective. However, Luxembourg’s rules were found to be the best solution to the problem with the Danish IVS in the comparative conclusion. Therefor the different implications were argued, as well as the credibility of the game theoretical analysis. This led to a legislative proposal, where the suggestion is to implement a combination of Luxembourg and Belgium’s rules for the Danish IVS. This would entail new rules, under which only physical persons can found an IVS, and a physical entrepreneur can only have shares in one IVS at a time. An entrepreneur would also be personally liable for the difference between the company’s registered share capital and the capital requirements for an ApS, if the IVS is not reregistered to an ApS three years after it was founded. In addition, a modification to the Belgian rules found in comparative analysis were suggested to be implemented, where entrepreneurs are personally liable for the compulsory resolution and the Danish states compulsory resolution costs. If the combination of these rules are implemented it would curb the problem of serial registrations of multiple IVS with no real activity, additionally it will increase the general perception of the company form as a more serious one.
It is concluded that the abolition of IVS is not the optimal solution, as there are regulatory measures that can optimize the use of entrepreneurial limited companies.
|Educations||MSc in Commercial Law, (Graduate Programme) Final Thesis|
|Number of pages||129|
|Supervisors||Troels Michael Lilja & Caspar Rose|