Capital Structure and Control Rights in EU Multinational Corporations After Case Law Emphasizing the “Substance over Form” Principle

Abstract

This paper analyzes the impact of recent precedents of the European Court of Justice on the relationship between capital structure and control in multinational corporations operating in the EU, in the context of the increasing emphasis on the principle of “substance over form” in adjudication practice. Combining the theory of capital structure with the legal analytical framework of EU company law, the paper clarifies the shift from an ownership-based approach to an economic substance-based approach when determining control and legal liability within a corporation. The analysis shows that many traditional capital structure models, based on preferred stock, hybrid capital instruments, or complex legal stratification, face the risk of being legally redefined if they do not accurately reflect the actual level of control and risk allocation. From there, the article points out the important consequences for corporate governance, shareholder rights, and investment strategy, while suggesting policy implications to balance free enterprise in the internal market with the requirements for transparency and fairness in the capital structure of multinational corporations.