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Comparative Company Law - 2019 1st sit exam with answers
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1st sit exam with answers
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Question 1Ante is a national of Slovenia. Way before Slovenia joined the European Union, Ante started a
restaurant famous for Slovene one-pot dishes - such as ricet, Istrian stew, mineštra, and buckwheat
spoonbread - in the capitol city of Slovenia, Ljubljana. In order to avoid personal liability he
incorporated his business as a Slovenian Delniška Družba (a public limited liability company under
Slovenian law). In 2004 Slovenia was one of the ten new EU Member States. Ante`s business profited,
as many tourists from other EU Member States came around in the following years. In order to spread
the financial risks Ante incorporated three more companies. These companies are also Slovenian public
limited liability companies and the shares in each of these three companies are owned by Ante (Class
X shares, granting a higher dividend) and his brother in law (Class Y shares).
Ante`s account manager strongly recommends Ante to simplify the structure by combining the four
Slovenian public limited liability companies into one joint new company, simply because the
operational costs of four separate companies outweigh the benefits of the aim to reduce financial
risks. There is a problem: Ante’s brother in law is not in favour of this plan.
a. How would you design the transaction so that the desired result is achieved? And in how far
would current EU law cover this transaction? Should Ante fear the position of his brother in
law? (3 points)
Slovenia’s economy suffered a lot from the crisis and many employees experienced salary cuts, or even
worse, unemployment. After several restructurings Ante is now the sole shareholder of only one
Slovenian public limited liability company. His wife is the sole director of that company. In order to
escape from economic setbacks they plan to transfer the head office to the neighboring EU Member
State Austria, whilst maintaining the Slovenian business form.
b. Would it be possible on the basis of EU law to object to this transfer from i. the Slovenian
side and ii. the Austrian side, assuming that these countries would want to oppose the
transaction? (4 points)
Ante and his wife still conduct the business in the form of the Slovenian public limited liability
company. In the meantime, they did however set up various branches by opening restaurants in
Vienna, Klagenfurt, Graz, Spittal, Bregenz, and Villach (all) in Austria (EU). These six restaurants turned
out to be extremely successful: their turnovers and profits by far outmatched the financial results in
Ljubljana. However, what goes up must come down: other Slovenian restaurants joined the
competition on Austrian territory and the restaurants’ margins diminished, leaving creditors of the six
restaurants unpaid. In early spring 2019 the business is facing the final decline and goes bankrupt.
Suppose that the court competent in insolvency proceedings would apply Austrian insolvency law, and
suppose furthermore that Austrian company law would set more severe company law standards in
view of directors’ liability than the Slovenian Company Act.
c. Would this from a EU law perspective work out in a positive manner for Ante’s wife? Please
explain. (3 points)
, Question 2
Bazinga is a Delaware company producing futuristic multipurpose hoverboards. Bazinga has managed
to become a powerful player in the market for city transportation. A few years ago Bazinga was in need
of new capital to finance its growth strategy. Howard Investments, a private equity investor, was
prepared to invest and bought 28,8% of the shares with voting rights in Bazinga. In exchange for its
participation, Howard investments negotiated several rights: the articles of association of Bazinga now
require that every business combination is approved by the general meeting with a 75% majority,
Howard Investments is also given the right to designate two out of five directors. The board of Bazinga
consists of Sheldon, Raj, Bernadette and two other directors. Bernadette is one of the two directors
who have been designated as directors by Howard Investments to represent its interests.
During one of the board meetings, Bernadette pitches to Sheldon, Raj and the other directors the idea
of acquiring Penny. Penny is a Delaware company focusing on the development of alternative energy
sources. Bernadette presents the acquisition as an opportunity to complement Bazinga’s business.
Salient detail however is that Howard Investments also owns a 65% share in Penny. Penny is not doing
well financially and investment banks have rated its stock ‘overvalued’. Other targets on the market
are not considered during the board meetings.
At some point the board agrees on the acquisition of Penny. Due to this transaction, Bazinga's debts
are doubled, leaving some of the shareholders to doubt the intentions underlying the
transaction. Leonard, a minority shareholder, strongly opposed the acquisition of Penny and considers
taking legal action.
a. Suppose that Leonard decides to initiate legal proceedings against Howard Investments. What
could be the basis of those proceedings and explain i. what Leonard will have to proof in order
to have a claim against Howard Investments and ii. what Howard Investments will then have
to proof in order to convince the court that it acted in the correct way. (3,5 points).
b. Explain i. what the business judgement rule is and ii. how this might come into play once
Sheldon and Raj are also challenged before court. (3 points)
c. Assume that Bazinga is a limited liability company incorporated in the United Kingdom. Which
directors’ duty is at stake in this case? Please explain. (1,5 points)
d. Explain the meaning of agency problems in light of the tensions within the Bazinga
corporation. (2 points).
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