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35-498: Centros Ltd v Erhvervs- og Selskabsstyrelsen (1999) C-212/97 is a European company law case, concerning the right of freedom of establishment. Centros Ltd, a wine import and export business, was registered in the United Kingdom and applied in Denmark, where it traded, to register there. The Danish authority, Erhvervs- og Selskabsstyrelsen , refused on the basis that the company

70-556: A mutual fund or (" collective investment scheme ") should control the voting rights. The UCITS Directive 2009 is primarily concerned with creating a "passport". If a firm complies with rules on authorisation, and governance of the management and investment companies in an overall fund structure, it can sell its shares in a collective investment scheme across the EU. This forms a broader package of Directives on securities and financial market regulation, much of which has been shaped by experience in

105-766: A " race to the bottom " in standards, although the Court of Justice soon affirmed in Inspire Art that companies must still comply with proportionate requirements that are in the "public interest". Among the most important governance standards are rights to vote for who is on the board of directors for investors of labour and capital. The Shareholder Rights Directive 2007 requires shareholders be able to make proposals, ask questions at meetings, vote by proxy and vote through intermediaries. This has become increasingly important as most company shares are held by institutional investors (primarily asset managers or banks, depending on

140-860: A "passport" to sell in any EU country, and transparency of financial contracts through duties to disclose material information about products being sold, including disclosure of potential conflicts of interest with clients. The Alternative Investment Fund Managers Directive 2011 applies to firms with massive quantities of capital, over €100 million, essentially hedge funds and private equity firms. Similarly, it requires authorisation to sell products EU wide, and then basic transparency requirements on products being sold, requirements in remuneration policies for fund managers that are perceived to reduce "risk" or make pay "performance" related. They do not, however, require limits to pay. There are general prohibitions on conflicts of interest , and specialised prohibitions on asset stripping . The Solvency II Directive 2009

175-725: A duty to act as a fiduciary to their limited partners and asset owners. Namely, they must place the interests of their LPs and asset owners ahead of their own interests. For a wide variety of reasons, LPs and asset owners may change asset allocations periodically which can lead to a shift of money, known as asset flows, from one asset class to another, or from one asset manager to another. Traditional asset managers invest in publicly traded equities or fixed income. In contrast, alternative asset managers, such as hedge funds and private equity firms, may invest in both traditional investments and alternative investments. Asset managers maintain relationships with their institutional LPs and asset owners through

210-422: A wealthy benefactor. In the south of Gaul, aqueducts were sometimes financed in a similar fashion. The legal principle of juristic person might have appeared with the rise of monasteries in the early centuries of Christianity . The concept then might have been adopted by the emerging Islamic law. The waqf (charitable institution) became a cornerstone of the financing of education, waterworks, welfare and even

245-510: Is called Qualified Foreign Institutional Investor (QWFII). In India, the term Foreign Institutional Investor (FII) is used to refer to foreign companies investing in India's capital markets. Recently FIIs have invested a total of $ 23 billion in the Indian market under this. With this, Foreign-exchange reserves of India have reached a total of $ 584 billion and it has become a new record in

280-599: Is directed particularly at insurance firms, requiring minimum capital and best practices in valuation of assets, again to avoid insolvency. The Capital Requirements Directives contain analogous rules, with a similar goals, for banks. To administer the new rules, the European System of Financial Supervision was established in 2011, and consists of three main branches: the European Securities and Markets Authority in Paris,

315-500: Is home to the world's largest pension fund (GPI) and is home to 63 of the top 300 pension funds worldwide (by Assets Under Management). These include: In the UK, institutional investors may play a major role in economic affairs, and are highly concentrated in the City of London 's square mile. Their wealth accounts for around two-thirds of the equity in public listed companies. For any given company,

350-784: The European Banking Authority in London and the European Insurance and Occupational Pensions Authority in Frankfurt. Europe Insolvency Law governs the rules and procedures related to insolvency and bankruptcy in European countries. It includes the EU Insolvency Regulation , which coordinates cross-border insolvency cases within the EU, except for Denmark. The regulation determines the jurisdiction and applicable law based on

385-586: The Institutions for Occupational Retirement Provision Directive 2003 . This requires duties of disclosure in how a retirement fund is run, funding and insurance to guard against insolvency, but not yet that voting rights are only cast on the instructions of investors. By contrast, the Undertakings for Collective Investment in Transferable Securities Directive 2009 does suggest that investors in

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420-555: The financial crisis of 2007–2008 . Additional rules on remuneration practices, separating depositary bodies in firms from management and investment companies, and more penalties for violations were inserted in 2014. These measures are meant to decrease the risk to investors that an investment goes insolvent. The Markets in Financial Instruments Directive 2004 applies to other businesses selling financial instruments . It requires similar authorisation procedures to have

455-550: The European Community was founded in 1957, a series of directives creating minimum standards for business across the European Union. A central aim restated in each Directive is to reduce the barriers to freedom of establishment of businesses in the European Union through a process of harmonising the basic laws. The object is that when laws are harmonised, business will not be deterred by different or more onerous laws, but at

490-601: The European regulations. Institutional investors An institutional investor is an entity that pools money to purchase securities , real property , and other investment assets or originate loans. Institutional investors include commercial banks , central banks , credit unions , government-linked companies , insurers , pension funds , sovereign wealth funds , charities , hedge funds , real estate investment trusts , investment advisors , endowments , and mutual funds . Operating companies which invest excess capital in these types of assets may also be included in

525-731: The Indian market. Also called Foreign direct investment or FDI, statutory agencies in India like SEBI have prescribed norms to register FIIs and also to regulate such investments flowing in through FIIs. In 2008, FIIs represented the largest institution investment category, with an estimated US$ 751.14 billion. Recently, FIIs recorded a net withdrawal of USD 770.67 million in a single trading day, including USD 440.86 million from equities, USD 327.44 million from debt, and USD 2.31 million from hybrid investments . Despite such withdrawals, total FII inflows for 2024 have remained positive at USD 18.241 billion, with fiscal year 2025 inflows at USD 8.924 billion, according to an SBI research report. Japan

560-659: The Revolutionary period) the weight of the traditional charities in the economy collapsed; by 1800, institutions solely owned 2% of the arable land in England and Wales. New types of institutions emerged (banks, insurance companies), yet despite some success stories, they failed to attract a large share of the public's savings and, for instance, by 1950, they owned 48% of US equities and certainly even less in other countries. Because of their sophistication, institutional investors may be exempt from certain securities laws. For example, in

595-737: The SE has its registered office, the law of that member state supplements the rules of the Statute. The Employee Involvement Directive 2001 also adds that, when an SE is incorporated, employees have the default right to retain all existing representation on the board of directors that they have, unless the negotiate by collective agreement a different or better plan than is provided for in existing member state law. The Court of Justice held in Centros that freedom of establishment requires companies operate in any member state they choose. This has been argued to risk

630-473: The United States, institutional investors are generally eligible to purchase private placements under Rule 506 of Regulation D as " accredited investors ". Further, large US institutional investors may qualify to purchase certain securities generally restricted from retail investment under Rule 144A . In Canada, companies selling to accredited investors can be exempted from regulatory reporting by each of

665-1090: The assets. Rather, they provide advice as to how the assets may be managed. Namely, they work closely with pension funds and other institutional investors providing independent investment advice that is meant to complement the institutional investors' knowledge and expertise. For example, a consultant may be hired by pension fund to advise the fund on portfolio construction, asset allocation, investment policy statements, performance monitoring, fund manager selection, etc. Institutional investors may also use these consultants as an extra layer of legal protection for their investment committees and boards by conveying that they adhere to industry best practices in their investment processes. In various countries different types of institutional investors may be more important. In oil-exporting countries sovereign wealth funds are very important, while in developed countries , pension funds may be more important. Some examples of important Canadian institutional investors are: China's program to allow institutional investors to invest in its capital market

700-487: The centuries those institutions acquired sizable estates and large fortunes in bullion. Following the collapse of the agrarian revenues, many of these institutions moved away from rural real estate to concentrate on bonds emitted by the local sovereign (the shift dates back to the 15th century for Venice, and the 17th century for France and the Dutch Republic ). The importance of lay and religious institutional ownership in

735-480: The concept of juristic person , yet at the time the practice of private evergetism (which dates to, at least, the 4th century BC in Greece) sometimes led to the creation of revenues-producing capital which may be interpreted as an early form of charitable institution. In some African colonies in particular, part of the city's entertainment was financed by the revenue generated by shops and baking-ovens originally offered by

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770-460: The construction of monuments. Alongside some Christian monasteries the waqfs created in the 10th century AD are amongst the longest standing charities in the world (see for instance the Imam Reza shrine ). Following the spread of monasteries, almshouses and other hospitals, donating sometimes large sums of money to institutions became a common practice in medieval Western Europe. In the process, over

805-409: The debtor's center of main interests (COMI) and ensures automatic recognition of insolvency proceedings across member states. It promotes cooperation among administrators, courts, and creditors from different jurisdictions to streamline processes and protect the interests of all parties involved. In addition to the EU framework, individual countries have their own national insolvency laws that complement

840-590: The largest 25 investors would have to be able to muster over half of the votes. Some examples of important U.S. institutional investors are: The major investor associations are: The IMA, ABI, NAPF, and AITC, plus the British Merchant Banking and Securities House Association were also represented by the Institutional Shareholder Committee (ISC). As of August 2014 the ISC effectively became

875-539: The market', passive index funds have gained traction with the rise of passive investors: the three biggest US asset managers together owned an average of 18% in the S&;P 500 Index and together constituted the largest shareholder in 88% of the S&;P 500 by 2015. The potential of institutional investors in infrastructure markets is increasingly noted after the financial crises in the early twenty-first century. Roman law ignored

910-754: The member state) who are holding "other people's money". A large proportion of this money comes from employees and other people saving for retirement, but who do not have an effective voice. Unlike Switzerland after a 2013 people's initiative , or the U.S. Dodd-Frank Act 2010 in relation to brokers, the EU has not yet prevented intermediaries casting votes without express instructions of beneficiaries. A Draft Fifth Company Law Directive proposed in 1972, which would have required EU-wide rights for employees to vote for boards stalled mainly because it attempted to require two-tier board structures, although most EU member states have codetermination today with unified boards. A series of rights for ultimate investors exist in

945-513: The pre-industrial European economy cannot be overstated, they commonly possessed 10 to 30% of a given region arable land. In the 18th century, private investors pool their resources to pursue lottery tickets and tontine shares allowing them to spread risk and become some of the earliest speculative institutions known in the West. Following several waves of dissolution (mostly during the Reformation and

980-465: The process of investor relations. For example, investor relations processes may include the asset manager regularly communicating investment performance, as well as important changes to the investment process, investment team, etc. Institutional investment consultants play an important role in the allocation of assets. These consultants act as an intermediary in an advisory capacity to institutional investors. They generally do not have discretion to manage

1015-805: The provincial Canadian Securities Administrators. As intermediaries between individual investors and companies, institutional investors are important sources of capital in financial markets. By pooling constituents' investments, institutional investors arguably reduce the cost of capital for entrepreneurs while diversifying constituents' portfolios. Their greater ability to influence corporate behaviour as well to select investors profiles may help diminish agency costs . Moreover, institutional investors' role as financial intermediaries means they operate under different organizational structures and regulatory frameworks compared to individual blockholders. This unique positioning allows them to leverage their size and expertise to enforce better corporate governance practices. Within

1050-568: The provisions of freedom of establishment in the EC Treaty , articles 52, 56 and 58. The Danish court referred the matter to the European Court of Justice (ECJ). The European Court of Justice held that the Danish authorities' refusal to recognise the company was contrary to articles 52, 56 and 58, and that its rules on minimum capital were not justified by the aim of protecting creditors by anticipating

1085-405: The risks of fraudulent bankruptcy due to the insolvency of companies having inadequate initial capitalisation. The national authorities could adopt less restrictive measures, such as enabling creditors to obtain necessary guarantees, or could adopt measures preventing or penalising fraud, if necessary with the cooperation of another Member State. European company law There have been, since

Centros Ltd v Erhvervs- og Selskabsstyrelsen - Misplaced Pages Continue

1120-540: The same time harmonisation provides a basic level of protection for investors in each member state, none of which are forced into regulatory competition . Since 2002, a " European Company " (or Societas Europaea , abbreviated to " SE ") has been available for incorporation in the Statute for a European Company Regulation 2001 . This sets out basic provisions on the method of registration (e.g. by merger or reincorporation of an existing company) but then states that wherever

1155-681: The term. Activist institutional investors may also influence corporate governance by exercising voting rights in their investments. In 2019, the world's top 500 asset managers collectively managed $ 104.4 trillion in Assets under Management (AuM). Institutional investors appear to be more sophisticated than retail investors, but it remains unclear if professional active investment managers can reliably enhance risk-adjusted returns by an amount that exceeds fees and expenses of investment management because of issues with limiting agency costs . Lending credence to doubts about active investors' ability to 'beat

1190-1286: The various types of institutional investors, the roles of limited partners (LPs), asset owners, and asset managers are often conflated. In practice, these types of institutional investors play very different roles in the investment industry. Limited partners and asset owners have legal ownership of their assets and make asset allocation decisions. That is, the primary control over strategic asset allocation decisions rests with limited partners and asset owners, often in consultation with institutional investment consultants. Institutional investors such as pensions, endowments, foundations, and sovereign wealth funds are examples of institutional LPs and asset owners. Limited partners and asset owners may manage their assets directly. Alternatively, they may outsource some or all management of their assets to external asset managers. In contrast, asset managers act as agents on behalf of limited partners and asset owners. Asset managers generally have little or no discretion on broad, strategic asset allocation decisions. However, asset managers generally have significant discretion regarding portfolio management, security selection, and risk management decisions, subject to any restrictions placed on them by their LPs and asset owners. Asset managers often have

1225-402: Was attempting to circumvent the Danish requirement for companies to pay up a minimum of share capital. In Denmark this was 200,000 Danish kroner , while in the UK the minimum capital requirement was £1. The Danish registry justified its enforcement of the rule as a way to protect creditors and prevent fraudulent insolvency. Centros Ltd argued that it had the right to be recognised in Denmark under

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