Article 1

Scope of application

The provisions of the present law shall apply for the purposes of determining the international rules applicable to commercial companies.

Article 2

Universality

The laws declared applicable by the provisions hereof shall be applied regardless of their State of origin, subject only to exceptions on public policy grounds.

Article 3

Lex societatis

1. The law applicable to commercial companies shall be that of their country of formation. In order to determine which country is concerned, special consideration shall be given to the company’s compliance with the substantive and procedural requirements for its formation, in accordance with the laws of the country in question.

2. Should a company fail to comply with those requirements, it shall be governed by the laws elected by its shareholders or members.

3. In the absence of agreement, the laws of the company’s place of de facto administration shall apply.

Article 4

Matters governed by lex societatis

The law applying to the commercial company shall govern the following matters:

1. The formation and termination of the company.
2. Legal capacity and capacity to act, without prejudice to the application of any rules on recognition, or rules restricting the activities of foreign commercial companies within the country in question.
3. The registered name of the commercial company.
4. The regime whereby the company expresses its intentions.
5. Internal relationships, particularly those existing between the commercial company and its shareholders.
6. The representation of persons acting on behalf of the commercial company.
7. The commercial company’s liability for debts.

Article 5

Creation of places of business by foreign companies

1. The creation of a place of business in a foreign country shall be governed by the law applicable to the commercial company and the laws of the country where the place of business is to be set up.

2. The law governing the commercial company shall be applied in order to establish the legality of the creation in compliance with its bylaws and the requirements to which it is subject.

3. The law of the country in which the place of business is to be created shall be applied to the requirements to be met in that country. The said law shall determine, in particular, the mandatory nature of registration, the obligations and controls imposed on places of business of foreign companies once they have been set up, and the consequences of failure to register.

Article 6

Rules applicable to commercial companies concerning incapacity, representation and liability

Any lack of capacity or limitations to the power of representation of a body or representative, or to the commercial company’s liability regime shall not be invoked where the said lack of capacity, or limitations to the power of representation or liability regime are not known to concern comparable entities in the country in which action has been taken on behalf of the commercial company, provided that one of the following circumstances obtains:

a) the commercial company acted through a branch registered in the said country and the limitations do not result from such registration;

b) the commercial company acted without a registered place of business, but third parties were not aware of, or could not have been aware of, given the circumstances, such limitations to capacity, to representation or to the liability regime.

Article 7

Shareholders' agreements

1. Any agreements between all or some of the shareholders and subordinating the exercise of their rights to the observance of certain procedures or to compliance with certain acts, independently of the provisions of the partnership agreement or the bylaws, shall be valid only where such validity is acknowledged by the provisions of the law applicable to the contractual instrument which contains them, and by the law applicable to the commercial company whose functioning is concerned by such agreements.

2. Should such agreements be null and void by virtue of the law applicable to the commercial company, the said law shall be applied to determine the effects of the invalidity.

3. Non-performance of this type of agreement may give rise to a right of action in respect of the commercial company’s acts on the sole condition that such an effect is provided for by the laws governing the company.