No. 54 - Reform of the right of withdrawal from a company

This paper makes a contribution to the debate on the reform of the right of withdrawal from business enterprises, setting out the main points of a proposal for new legislation. The work is inspired by the observation that the rules laid down in the Civil Code of 1942 are ineffectual in law, and compares the ‘law in practice’ with the proposals for the reform of company law that enhance the institution of withdrawal (Section 1). In response to these legislative initiatives, the present research paper describes the potential role of withdrawal in respect of the advantage – not only, or not so much, for minority shareholders but for all shareholders – of reducing the cost of capital for social enterprises and maximising the return on equity investments (Section 3). This is followed by an analysis of the possible costs of the institution for business enterprises, particularly the costs associated with the valuation of the shareholding and the opportunism of shareholders (Section 4). On the basis of these considerations, the paper then outlines a proposal for reform designed to achieve a compromise between the conflicting interests affected by the institution of withdrawal. Particular attention is given to role of the freedom of business enterprises to draft their own by-laws, and it is pointed out that neither creditors’ rights nor the general interest in preserving the business enterprises are themselves sufficient reason to dismiss recourse to the by-laws (Section 5). The question of the freedom to draft by-laws is tackled separately for the two frameworks of negotiation represented, respectively, by the ‘closed’ type of enterprise and the ‘open’ enterprise (Section 6). The conclusions review the points considered, emphasising some of the critical areas of the reform proposals (Section 7).