Capital market and public companies law

CAPITAL MARKETS AND EU COMPANY LAW

Paolo BenazzoPapers + cases/codes/... : material of exam.

Exam: written, with 3 open ended questions. 50-60 minutes.

The course is divided in four sections:

1. Corporate governance: what are public companies and the relevance of these in our economics and societies;
2. Company and corporations are synonymous: company is according to UK; corporations to USA.

Based on whom is owned a company, we distinguish:

• Private company = owned by us, privates;
• Public company = owned by governments, States.

PR. C.) Private company hasn't shares [quote, azioni]; public, has.

In private companies, having shares means that in companies there are equity holders, subjects who invest capitals in the company. If we decide to establish a private company, we invest money in the company and we become equity holders, owners of capital, of equity (not debt!). "Equity" means that if we invest money, all these monies are definitely invested in the company and we...

cannot pretend to have these monies recovered: once that have been invested, until the company exist, those monies are invested in the business activity.

We are not borrowing money to the company! In case of borrowing money, the creditor has a legal right towards the company to have the money paid back under the terms of the contract.

Equity holder is running a risk: if things go well, the profits belong to the equity holder; if the company is in bankrupt, the investment is lost and he can't request to be paid back (like in banks).

Equity and share holder: no differences in terms of risks: they invest money in company: if the company makes profits, profits are to be paid to e.h. and s.h.; if not, nobody can say anything to the company. If the company goes insolvent, the monies are lost definitively.

PU.C.) Shareholder: peculiarity is that the participation in the company is represented by means of shares. A "share" is a piece of the equity capital of the company [capitale]

Il valore sociale della società è rappresentato dalle azioni. Ogni azione ha lo stesso valore delle altre (ad esempio, 20€ di capitale sociale diviso in 20 azioni da 1€ di valore nominale). Per diventare proprietario di un'azione, è necessario investire almeno 1€. Ogni azione è rappresentata da un pezzo di carta che attesta che essa rappresenta una parte del capitale della società. Il proprietario dell'azione è un partecipante come azionista al capitale della società. Le azioni possono passare facilmente di mano: se voglio uscire dalla società, non posso semplicemente dirlo alla società, ma devo vendere l'azione. Quindi, le società pubbliche non sono un affare privato, un accordo tra un piccolo gruppo di azionisti: fanno negoziazioni! Non sono destinate a gestire piccole attività, ma attività commerciali enormi che coinvolgono ingenti capitali. E il modo più semplice per raccogliere questi capitali è dividerli in azioni, che sono facilmente negoziabili. E il possessore dell'azione è legalmente un socio della società.

So, public companies are companies which are destined to have the participation to the capital negotiated on markets. By subscribing a share, I can set a stop loss to my investment, that means that I can establish the limit of the risk I can take. In ex: if I subscribe a 1€ share, my risk is 1€.

Private company doesn't go on stock exchange market, market where shares are exchanged. small number of participants.

Public companies instead raise capitals from stock exchange market: listed companies. company who publicly raise capital from the anonymous spread large number of investors.

Public companies are both necessary and dangerous for and in our economies: without p.c. huge and large activities cannot be run; but economies they have to handle with care the p.c.

Ex of p.c. in history: East India Company was the first iconic example of public company, because by an order by the queen was established a company which, by means of the order of the queen, had the privilege

to issue shares, with limited responsibility to the shareholders. That was the way to raise the huge amount of capital, which allowed the company to discover new territories, etc. …That was a very dangerous and challenging the economy.

2) EU companies’ laws: we will see what are these laws around EU and how EU common laws are implemented in each EU country + harmonization and divergence in each country, but there is a common path although despite the differences in jurisdiction.

3,4) We will see the two major actors (shareholders and managers) of the corporate governance game, that is the rule according to which a corporation/company is structured, organized, governed, managed. Corporate governance are rules that are intended to find the best way to structure and to run the company. Rules are intended to govern the conflict of interests, which are endemic in the public companies. P.c. are nexus of conflicts, meaning the interrelation of conflict of interests inside the company and outside.

Ex: managers vs principles. Two last topics are about AI in the new corporate governance game and what are made companies for. 4 W. Why this course? Because: … see slide