DEBORAH A. DEMOTT [*] I INTRODUCTION A central question that underlies many analyses of corporate governance is whether the law and legal institutions have a constituent role in shaping governance practices, or whether the law, as well as governance practices, are best viewed as the inevitable results of market forces, centered upon capital markets. A separate, but related question is the degree to which mechanisms of governance--such as shareholder voting, take-over bids, independent directors, mandatory disclosure, and shareholder litigation--can function adequately as substitutes for one another. The perspective I offer on these questions is based on a comparison between the United States and the United Kingdom, which are sufficiently similar in relevant respects that their divergences are illuminating. The Law Commissions of England and Scotland recently released a Consultation Paper surveying U.K. law on directors' duties with a particular focus on Part X of the Companies Act 1985, which addresses specific types of self-dealing by directors. [1] Reading the Consultation Paper is an instructive experience for one familiar with corporate law in the United States because it confounds conventional wisdom about the degree of similarity between corporate law in the two countries. The descriptive as well as the evaluative portions of the Paper suggest that underlying principles diverge more between the United States and the United Kingdom than often is assumed. In particular, each country's body of law reflects different assumptions about the appropriate role of specific institutions in shaping the conduct of corporate directors and managers. The degree of some of the substantive contrasts is striking. For example, the U.K. statute criminalizes particular transactions that, in the United States, would be well within the discretion of financially disinterested directors. As legislation, moreover, Part X of the Companies Act 1985 has a style and feel that is distinctly different from counterpart provisions in U.S. corporation statutes. Finally, the Consultation Paper illustrates the difficulty of rethinking settled doctrines and statutory structures within the law, so pervasive and inescapable is the force of underlying assumptions. Even analyses grounded in economics may reflect starting assumptions drawn not from economic principles of general applicability, but from a specific legal context. In this article, I focus on the subject of Part X--transactions involving self-interested directors--drawing contrasts with corporate law in the United States. I focus primarily on public companies and on the law of Delaware, the leading situs of incorporation in the United States for public companies. [2] I examine several types of conflict scenarios: self-dealing between the corporation itself and the director; indemnification; directors' pursuit of business opportunities related to the corporation; and defenses to hostile take-over bids. The legal treatment of self-interested transactions diverges more between the United States and the United Kingdom than one might predict, given common starting points. The United States and the United Kingdom share a legal heritage encompassing the common law and principles of equity. Corporation statutes in both countries do not supplant these principles. [3] In both countries, corporation law is grounded in a necessary formalism that treats the corporation itself as a distinct legal entity that may incur obligations and possess rights separate from its owners. Likewise, although directors owe duties to the corporation itself, corporate law accords primacy to shareholders' interests. In both countries, moreover, much business financing and investment is intermediated by capital markets, in contrast with financial systems predominantly organized around relatively activist financial institutions that themselves make and hold loans to business borrowers, and buy and hold equity investments in businesses. …