Is Corporate Law 'Private' (and Why Does it Matter)?

Abstract

This paper examines and challenges the dominant academic portrayal of Anglo-American corporate law as an aspect of ‘private’ or facilitative law, and argues for a re-characterisation of the subject that reflects the centrality of public regulation to its core dynamics. In this regard, the paper represents part of a larger project aimed at highlighting the limitations of the popular contractarian theory of corporate law, which essentially seeks to present corporate law rules as the endogenous outcome of private contractual processes rather than regulatory state interventionism. The first part of the paper explains how the particular way in which an area of law (including corporate law) is characterised academically is of paramount importance to its future development, by establishing the core descriptive and normative parameters thereof. The second part explores the purported ‘privity’ (or ‘privateness’) of corporate law as it is most commonly understood and taught within the Anglo-American environment, and demonstrates the important normative implications that tend to follow from this position. The third part highlights how the widespread presence of mandatory and irreversible corporate law rules in the Anglo-American environment poses a difficult empirical challenge for those who seek to present corporate law as a principally contractual, rather than regulatory, phenomenon. The fourth and fifth parts of the paper look at the various ways in which proponents of the contractarian paradigm have sought to rationalise the regulatory dimensions of corporate law in a way that actually affirms, rather than undermines, the purported ‘contractualness’ (and thus 'privateness') of the subject matter. Particular attention is devoted to the controversial ‘market mimicking’ rationalisation of regulatory state interventionism in corporate law, which essentially seeks to portray mandatory rules as a publicly-provided embodiment of what the relevant contracting parties (i.e. shareholders and managers) would have bargained for had they been afforded the opportunity to do so. The sixth part of the paper explains the logical difficulties with this claim, and the final part concludes by highlighting the principal normative implications of the paper’s key finding – in short, that Anglo-American corporate law is at root an undeniably public phenomenon, whose innate regulatory dimensions cannot readily be explained away by recourse to contractarian logic.