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Edited by François-Charles Laprévote, Joanna Gray and Francesco De Cecco

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Edited by François-Charles Laprévote, Joanna Gray and Francesco De Cecco

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Ioannis Kokkoris

This chapter analyses the special nature of banks, and how the importance of the banking sector and its stability overlaps with the preservation of competitive banking markets. Banks have a unique standing in the economy, and are regarded as more vulnerable to instability than other firms as they provide liquidity and are involved in inter-bank lending markets and the payment system. Due to the systemic nature of banks, governments try to avert a crisis that can affect the whole banking sector by ensuring that banks which are ‘too big to fail’ remain sustainable. Such intervention has a distortive effect on competition, as it prevents ‘self-correction’ of the market. State aid measures that characterized the response of regulators in the recent financial crisis were based on the premise of the special nature of the banking sector and its importance to the economy. In addressing the special nature of banks the chapter looks into the approach adopted towards banks under State aid control, tackling issues such as ‘too-big-to-fail’ and the BRRD and SRM.

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Edited by François-Charles Laprévote, Joanna Gray and Francesco De Cecco

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Introduction

Global Perspectives

Susan Watson and P.M. Vasudev

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Introduction

A Survey of Legal and Regulatory Trends

P. M. Vasudev and Susan Watson

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Implications of shareholder activism

A Survey of Legal and Regulatory Trends

Anita Anand

This chapter asserts that shareholder democracy, or the ability of shareholders to influence the corporation through their vote, underpins the legitimacy of shareholder activism. Examining the empirical literature that evidences the benefits of shareholder activism, the chapter argues in favour of increased shareholder representation in director nominations by proxy, not only for the sake of shareholder democracy, but also for the overall benefit of the corporation. Keywords: • Shareholder activism • Hedge fund activism • Shareholder democracy • Director primacy • Proxy access • Canada Business Corporations Act

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Gerard McCormack, Andrew Keay and Sarah Brown

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Gerard McCormack, Andrew Keay and Sarah Brown

Chapter 1 deals with Directors’ liability and disqualification imposed when their company ends up in insolvency. Liability can take various forms across Member States. In some Member States, the duties that directors owe when their company is solvent shift in nature when their company is near to being insolvent or actually insolvent and if directors do not fulfil their duties they can be held liable for breach of duty. In the vast majority of other states, directors are held liable if they do not file for insolvency proceedings within a prescribed period from the point where they know or ought to know that their company is insolvent. In some states, directors may be liable if they do not take action to stop their company’s slide into insolvency or act to prevent its insolvent position worsening. The liability of directors could be civil and/or criminal. There are a number of obstacles to bringing proceedings against miscreant directors. From the data obtained the following are the most frequent: the directors are impecunious and not worth pursuing; proceedings are costly; and the time delay in getting a hearing of proceedings can be substantial. There is some opinion, but far from unanimous, that the difference in approach in Member States can lead to significant problems. All but a couple of Member States have some form of disqualification process for directors and it is generally seen as an important element in the monitoring and control of directors. The approach taken to disqualification differs across the EU, and is reflected in the time periods prescribed for disqualification, the reasons for making a disqualification order and whether there are other consequences, besides disqualification from acting as a director, emanating from the handing down of an order of disqualification. A problem that exists with breaches of duties and disqualification is that neither are clearly seen as fitting within either company law or insolvency law where the directors’ company is in financial difficulty and ends up subject to insolvency proceedings, so they are matters that can ‘fall between the cracks’ as there is confusion in knowing how they should be addressed.