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c - Finance and the Origins of Modern Company Law
- from 1 - The Evolution of the Corporate Form
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- By Paddy Ireland, University of Bristol
- Edited by Grietje Baars, City University London, Andre Spicer, City University London
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- Book:
- The Corporation
- Published online:
- 31 March 2017
- Print publication:
- 24 March 2017, pp 238-246
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- Chapter
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Summary
Of all the branches of law, company law is perhaps the one least readily understood except in relation to its historical development.
L. C. B. Gower in Principles of Modern Company Law (Gower and Davies, 1997: 18)Company Law and the Joint stock Company
There has long been a tendency to regard the rise of the business corporation as a phenomenon in little need of explanation. As early as the 1930s, one scholar was describing it as ‘the story of an economic necessity forcing its way slowly and painfully to legal recognition’ (Hunt, 1936: 13), and another was arguing that until British law made the corporate privileges freely available in the mid-nineteenth century ‘full economic development was impossible’ (Shannon, 1931: 12). More recently, but in a similar vein, a group of prominent legal scholars have described the ‘common structure’ and ‘underlying uniformity’ of the corporate legal form as ‘induced by the economic exigencies of the large modern business enterprise’, before going on to suggest that so indispensable are its key features – separate legal personality, limited liability, transferable shares, delegated management and shareholder primacy – that ‘corporate law everywhere must, of necessity, provide for them’ (Kraakman et al., 2004: 1215). The suggestion is that the rise to dominance of the corporate legal form in its current form was essentially economically determined, the product of technological advances and the efficiency-enhancing imperatives of market forces. This belief underlay recent claims that we had reached ‘the end of history for corporate law’ and that corporate law around the world is converging on a standard shareholder-oriented model of the corporation (Hansmann and Kraakman, 2001). The effect of this story of economic inevitability and ‘evolution to efficiency’ is, of course, to naturalize and de-politicize the corporate legal form as currently constituted, immunizing it from serious critical examination and evaluation. This chapter argues that, contrary to this account, history shows that far from being a product of (more or less) inexorable economic forces, the corporate legal form, as developed for businesses, was, in the specific form we know it, a political construct, developed in large part to accommodate and protect the interests of rentier investors.
Property and contract in contemporary corporate theory
- Paddy Ireland
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- Journal:
- Legal Studies / Volume 23 / Issue 3 / September 2003
- Published online by Cambridge University Press:
- 02 January 2018, pp. 453-509
- Print publication:
- September 2003
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This paper critically evaluates the contractual theories of companies and company law which have risen to prominence in recent years. It argues that history reveals as misguided the attempt to depict public companies as essentially contractual in nature, one of the most striking features of the development in nineteenth century Britain of the first body of (joint stock) company law having been its gradual move away from the principles of agency and contract underlying the law of partnership from which it emerged. Against this backdrop, the paper moves on to explore the ways in which theorists have tried, against the odds, to characterise public Companies as contractual and the reasons for their attempting to do so. While it might be apposite to view many private or closely held companies through the prism of contract, the paper argues, public companies and much of company law itself can only properly be understood when viewed through the prism of financial property. Indeed, it suggests, this is implicitly confirmed by the Company Law Review and (paradoxically) by the recent work of corporate governance specialists and financial economists in the US, with its focus on investor protection and the preservation of financial property's integrity, and its emphasis on the crucial role of (public) regulation in these processes. The paper concludes that these property forms are not merely the objects, but the products of regulation and that this has important implications for our understanding of both company law and corporate governance. In making these arguments, it seeks to cast some light on the nature of intangible property, on the differences between contract-based and property-based rights, on the neo-liberal idea of ‘deregulation’, and on the unity and scope of company law as a legal category.