The Spectre of Letterbox Companies : An Empirical Analysis of the Bankruptcy Ratio of Private Limited Companies Operating in Germany in Years 2004–2017

Generally, letterbox companies are corporate structures (legal entities), which do not maintain any real economic activity in the country of registration. In principle, alone or combined with other structures such as trusts or foundations, they serve either to evade provisions applicable in the place where a company has its day-to-day business (headquarters), or to conceal some facts (or assets) or the identity of the true beneficiaries (the owners of assets) behind the corporate structure, in order to impede monitoring and enforcement of certain legal provisions. This contribution seeks to provide a data analysis concerning the selected form of companies economically active in Germany between 2004 and 2017. In particular, it aims at comparing the number of insolvency proceedings instituted in Germany in case of business conducted either under the corporate forms of German origin (mainly GmbH and UG) or English limited liability companies. The results of the analysis serve to answer to the question of whether a significant incursion of foreign corporate forms, emanating a different approach as to protect their corporate stakeholders from the State A to the State B, did contribute to the systematic risk borne by corporate creditors, and thus, did it downgrade their protection standard in the State B. The article is organized as follows. First, it provides an overview of the contemporary dilemmas pertaining to letterbox corporate vehicles in a single market. Second, it presents a data analysis on selected companies and their insolvency in Germany between 2004 and 2017. The final section concludes