Modern Company Law Research Articles

Cilj privrednog društva sa osvrtom na aktuelnu pandemiju

What is the purpose of companies? Is that purpose unique for all companies? Is a company allowed to formulate its own purpose and to make decisions in accordance with that purpose? Is this the area where the lawmaker should intervene, to what extent and in which manner? What role should or could a company have in determining its own purpose? These are some of the questions to which the author is trying to find the answers, taking into consideration a number of theoretical discussions, as well as comparative and domestic legislative movements. Dilemma between the shareholder theory and the stakeholders' theory represents one of the most controversial topics in modern company law. The COVID pandemic has additionally emphasized the basic problems of these theories. Bearing in mind that definite solutions in this area cannot be given, the author analyses relevant Serbian statutory provisions, in order to make certain suggestions for their adequate interpretation.

Majority Dictates and Minority Rights: ‘Oppression and Mismanagement’ Law and Practice in India – A Primer for International Business Lawyers

One of the foundational democratic principles of modern Company Law is that the majority shareholders of the company decide the company’s policy, and take internal management decisions, binding the minority, which are not usually interfered with by the company courts and tribunals. This was first judicially recognized and established in the famous English case of Foss v. Harbottle two centuries ago. Numerous exceptions have however also evolved from time to time to the Foss v. Harbottle rule. One such exception is ‘Oppression and Mismanagement’. And so, the statutory remedies for oppression of the members and mismanagement of the company assume much importance. However, the oppressed minority members cannot easily surmount the necessary statutory thresholds for availing these remedies. Bearing in mind the limiting considerations, this article scrutinizes the current Company Law and policy challenges in this realm in India, by pointedly analysing the key legal provisions in light of some important disputes and case law from India, which also rely on some English cases as well. The salient concluding results clearly and succinctly present the key legal aspects of the regulatory law and practice in India in this crucial area of Company Law, thus making this article an informative and analytical Primer on this area for International Business Lawyers. Shareholders, minority rights, oppression and mismanagement, Foss v. Harbottle

International Insolvency Regimes and Rescue Measures Particularly with Reference to the USA and the UK

The court has since the dawn of modern company law enjoyed the jurisdiction to order the liquidation of a solvent company. Now radical change has been introduced in the world, in the field of winding up of the companies since the incorporation of the companies in the world. Different jurisdictions like USA in shape of Chapter 11 of bankruptcy code 1978, UK in shape of scheme of arrangements, workout plan etc., South Africa in shape of appointing Judicial Management and Australia in shape of Official Manager have developed various set of rules and regulations dealing with insolvency and other liquidations problem, when company is subject to financial distress, and also alternative corporate rescue mechanism to deal with the corporate disputes of similar nature between management of the companies and others. In this modern corporate world the investor would choose the place where he has more opportunities and protection to his capital. Favorable substantive and procedural law and rules which are sympathetic towards redress of his corporate dispute are the requirement of an investor. Insolvency jurisdictions of UK and USA are more favorable to the foreign investors because there is a sophisticated and more adequate procedural advantage. This paper also aims, inter alia, to analyze the new techniques prevalent in various jurisdictions of the USA and The UK.

The mythology of Salomon's case and the law dealing with the tort liabilities of corporate groups: An historical perspective

Salomon’s Case has for a long time been widely seen as a landmark case that is the keystone of modern company law. A mythology has developed around the case that has resulted in the Salomon principle exercising an iron grip on company law. The rigid application of the principle in Salomon’s Case to corporate groups has enabled corporate groups to structure themselves in ways that limit the tort liabilities of the group as a whole and so raises important social, economic and ethical questions regarding the allocation of risk that are not addressed by the application of the Salomon principle. This article suggests that given the importance of the social, economic and ethical issues raised in cases of mass torts that invariably involve corporate groups, it is preferable that these issues are resolved by tort law, which is concerned with the allocation of risk, thereby circumventing the dead hand of Salomon.

Single or Taken? Corporate Identity Questioned

Separate corporate identity is a fundamental principle of modern company law. However, legislation as well as judgements are prone to limit its consequences if they see fit for various reasons such as ‘justice’. These cases of ‘piercing the veil’ question the very concept of corporate identity. Therefore, after analysing the current legal status in Ireland with many references to the UK, this article argues that this lack of coherence produces economically inefficient results and should thus be substituted by a more structured approach. Concluding, an adaption of the corporate objective to focus on the company rather than shareholders will be proposed as a remedy for the current incoherence.

The Pervasive Issue of Liability in Corporate Groups

The question of liability in corporate groups has been referred to as ‘one of the great unsolved problems of modern company law’. This special issue indicates the multi-faceted faces of corporate groups both in national, transnational and international settings, especially as regards corporate group liability. The contributions in the issue show that although there is not a common understanding of groups and how they should be regulated, the legislators and notably the courts and academics continue to try to think out new ways to understand corporate structures and efficiently tackle attempts to use them to avoid societal and environmental liabilities.

DIRECTORS’ FIDUCIARY DUTIES AND THE COMMON LAW: THE COURTS FITTING THE PIECES TOGETHER Mthimunye-Bakoro v Petroleum Oil and Gas Corporation of South Africa (SOC) Limited (12476/2015) [2015] ZAWCHC 113; 2015 (6) SA 338 (WCC) (4 August 2015)

The partial codification of directors’ duties in section 76 of the Companies Act (71 of 2008, hereinafter “the Act”) is not a comprehensive statement of directors’ duties. Section 158 of the Companies Act requires of a court to develop the common law as necessary to improve the realisation and enjoyment of the rights created in the Act. In a partial codification the common law is still applicable to the extent that it has not been excluded. The courts can develop the duties and even create new duties as opposed to complete codification where the courts may refer to the common law when interpreting the statutory duties, but cannot create new duties .Partial codification allows the courts to do ground-breaking work. It allows for the development of the law in a way that would be relevant to the demands of modern company and commercial law. On the other hand it can be argued that creating new duties amounts to judicial law-making, contravenes the principle of iudicus est ius dicere non dare and is inconsistent with the principle of separation of powers. In Mthimunye-Bakoro v Petroleum Oil and Gas Corporation of South Africa (SOC) Limited Davis J indicated that the case raised important questions with regard to the common-law duties of directors, the purpose of those duties and the relationship between the common law and the Companies Act (71 of 2008). The court’s decision confirms the importance of considering the facts and circumstances of each case in order to determine whether resolutions taken at meetings are valid. This case is a discussion and analysis of the judgment of the Western Cape High Court. Reliance on the statutory provisions and the common law allowed Davis J to avoid an extremely strict construction of the meaning of “personal financial interest”. The case includes some comments on judicial law-making but does not propose to be a detailed discussion of this matter. The case concludes with a recommendation to amend section 75(5) and 71(4) of the Companies Act (71 of 2008).

The Value of Board Gender Diversity vis-a-vis the Role of the Board in the Modern Company

A number of countries have begun to adopt quotas for the appointment of women directors on company boards. Countries like the United States and Australia, have adopted the disclosure regime by requiring that public listed companies must disclose their diversity policies in their annual reports. This article argues that the board gender diversity debate must focus on the role of the board of directors in order to determine if board gender diversity can be valuable. Thus it analyses the role of the board in modern company law and then weighs the arguments being used in favour of corporate gender quotas against this in order to ascertain if these arguments hold water.

The Mythology of Salomon's Case and the Law Dealing with the Tort Liabilities of Corporate Groups: An Historical Perspective.

Salomon’s case has for a long time been widely seen as a landmark case that is the keystone of modern company law. A mythology has developed around the case that has resulted in the Salomon principle exercising an iron grip on company law. The rigid application of the principle in Salomon’s case to corporate groups has enabled corporate groups to structure themselves in ways that limit the tort liabilities of the group as a whole and so raises important social, economic and ethical questions regarding the allocation of risk that are not addressed by the application of the Salomon principle. This article suggests that given the importance of the social, economic and ethical issues raised in cases of mass torts that invariably involve corporate groups, it is preferable that these issues are resolved by tort law, which is concerned with the allocation of risk, thereby circumventing the dead hand of Salomon.

Dangerous frontiers in corporate governance

AbstractThe historical evolution of corporate governance is considered, highlighting the different eras of governance, the dominant theoretical and practical paradigms, the reformulation of paradigms and counter paradigms. Two alternative and sharply contrasting theorizations, one collective and collaborative (the work of Berle and Means), the other individualistic and contractual (agency theory and shareholder value) are focused upon. The explanatory potential of Blair and Stout's team production theory is elaborated, and its conception of the complexity of business enterprise, with a mediating hierarch (the board of directors) securing a balance between the interests of different stakeholders. The potential for reform of corporate purpose, corporate governance and directors’ duties is examined with reference to the UK Modern Company Law Review. The impact of the intensification of the financialization of corporations is analysed, with the increased emphasis upon short-termism. The origins of the global financial crisis in shareholder value orientations and the continuing reverberations of the crisis are explored. Finally, the imperative of the advance of sustainable enterprise is argued, and the critical changes necessitated in corporate purpose and directors’ duties.

Berle and Means Debate

This paper discuss about the debate between berle and means on the basis of separation of ownership and control in corporate world to form good governance. Berle and Means researched the consequences of ownership and control being separate. As businesses grow and shareholders increase in number, any shareholdings that directors have will be a proportionally smaller capital stake. Directors' income will derive mostly from return on their labor as directors, not from their capital investment. If their motivation is purely pecuniary.Berle and Means argued that the structure of corporate law in theUnited States in the 1930s enforced the separation of ownership and control because the corporate person formally owns a corporate entity even while shareholders own shares in the corporate entity and elect corporate directors who control the company's activities. Compared to the traditional notion of property, say over one's laptop or bicycle, the functioning of modern company law “has destroyed the unity that we commonly call property”. This occurred for a number of reasons, foremost being the dispersal of shareholding ownership in big corporations: the typical shareholder is uninterested in the day to day affairs of the company, yet thousands of people like him or her make up the majority of owners throughout the economy. The result is that those who are directly interested in day to day affairs, the management and the directors, have the ability to manage the resources of companies to their own advantage without effective shareholder scrutiny.

Deconstructing the Mythology of Shareholder Value: A Comment on Lynn Stout’s “The Shareholder Value Myth”

This review article seeks to celebrate the deconstruction of the mythology of shareholder value inspired by Lynn Stout, and to dismantle the hegemony of agency theory, which originated the concepts of shareholder value and shareholder primacy. In order to offer a contextualized, historical critique of the intellectual forces that created agency theory and the concept of shareholder value, the analysis presents a broad consideration of the financialization of the Anglo-American corporation in the later decades of the twentieth century. It was in this period that the Anglo-American corporation was crudely transformed from being a wealth-creating vehicle for the wider community of stakeholders and whole economy, into a bundle of assets with the sole purpose of benefiting shareholder interests. This analysis traces some of the historical critique of corporate purpose, and the wider implications of the critique for corporate activity. The article goes on to analyse the interpretations of corporate purpose emerging in modern company law reform. Finally, the article considers the implications of the growing international corporate social responsibility movement for directors’ duties, which is arguably in contradiction to many of the fundamental beliefs of shareholder value, and recasts the direction of corporations towards more responsible and sustainable value creation.

Handlung, Firma, Unternehmen. Zur Institutionalisierung der modernen Unternehmung im 19. Jahrhundert

Abstract The article focusses on the development of companies’ legal forms and the institutionalisation of modern enterprises in the early 19th century German economic system. It demonstrates that the development of multiple modern enterprises in Germany after 1800 preceded the evolvement of statutory company legal forms, as modern company law was not introduced until the Allgemeines Deutsches Handelsgesetzbuch of 1861. By this time, the economic systems surrounding modern enterprises were already widespread and had become generally accepted institutions in economic life. The article concludes by analysing the institutionalisation of a company as a case in hand. The case study demonstrates – by taking Werner Sombart’s consideration of businesses “gaining independence” from their owners into account – that even the institutionalisation of one of the early large-scale enterprises –the Gutehoffnungshütte concern – involved a lengthy process, and was not achieved by the enterprises’ foundation or its choice of company legal form alone.

Unfairness and confusion: inherent features of floating charge security

The biggest contribution of modern company law to the world of commerce is without doubt the floating charge. Indeed, it has been graphically likened to a large cloud that hovers over the company's...

The European Private Company (SPE): Uniformity, Flexibility, Competition and the Persistence of National Laws

In 2008 the European Commission put forward proposals for a European Private Company (SPE), following up on the adoption of the European Public Company legislation of 2001. Although speedy adoption of the SPE proposals was initially hoped for, subsequent negotiations among the member states have stalled, despite at least two revised drafts of the proposals having been produced by the Presidency of the European Council. This article seeks to identify the challenges posed to the national company laws of the member states by the Commission’s proposals for a ‘simple and flexible’ Community form of incorporation. It seeks to argue that the discussions among the member states have revolved mainly around the question of the appropriate role for mandatory rules in modern company law. Member states have been reluctant to see the SPE freed from mandatory rules to which their national companies are subject, because of the competition to their national laws which the SPE would generate. On the other hand, member states with few mandatory rules in their domestic law have been reluctant to see the SPE burdened with mandatory rules which do not apply to domestic companies, because otherwise their businesses will be deterred from taking up the new European form and obtaining its advantages. The article predicts that, of the possible legislative solutions to this conflict, referring more of the rules applicable to the SPE to the national law of the state in which the SPE is registered is likely to be the dominant one, even though this will undermine both the uniformity and flexibility goals of the proposed legislation. It also considers how effective the ‘national law’ strategy is likely to be in the light of the Treaty provisions on freedom of establishment.

The Danish Green Paper on Company Law Reform — Modernising Company Law in the 21st Century

A wave of company law reform has swept across Europe and has now reached Denmark, where a proposal for a new combined companies act has been put forward and will soon enter the legislative process. In this article, the driving forces behind these reforms are explored. They are: the freedom to choose among the company law regimes of the European Union that follows from the case law of the EC Court of Justice; the demise of the doctrine of protection of capital; and the increasing insignificance of the distinction within company law between public and private limited companies. The main tenets of the Danish reform are: the introduction of a combined companies act to cover both the public and the private limited company; the possibility to choose between the main corporate governance models known in European company law, which, in combination with the possibility to use English at board meetings, the general meeting of shareholders and in public documents and accounts, should cater to the needs of cross-border business and investment; and a relaxation of the capital regime allowing limited companies more freedom in deciding the structure of their share capital and the distribution of control.

Disguised Returns of Capital - An Arm's Length Approach

Disguised Returns of Capital - An Arm's Length Approach

Legal Liability of Directors and Company Officials Part 1: Substantive Grounds for Liability (Report to the Russian Securities Agency)

This Article contains chapters 1 and 3 of a World Bank sponsored Report, prepared in December 2006, to the Russian Federal Service for the Financial Market (FSFM). It discusses the liability under company law of directors, senior company officials, and controlling shareholders of public companies in Canada, France, Germany, Korea, Russia, the United Kingdom, and the United States (with a more limited look at Austria, the European Union, Italy, Japan, and Latvia), and recommend amendments to Russian Company Law. It proposes measures to define the concepts of good faith and conflict of interest; establish duties of disclosure and confidentiality extend duties under company law to controlling shareholders and de facto directors for conflict of interest transactions; and protect directors against liability for business decisions adopted without a conflict of interest. The Article includes an Introduction for Prof. Black which provides an overview of Russia’s progress in creating a modern company law. A related Article includes chapters 8-9 and 11-13 of the Report, and addresses procedural rules for shareholder lawsuits and administrative and criminal liability of directors and company officials. See Legal Liability of Directors and company Officials Part 2: Court Procedures, Indemnification and Insurance, and Administrative and Criminal Liability (Report to the Russian Securities Agency), 2008 Colum. Bus. L. Rev., available at http://ssrn.com/abstract=1010307. The full Report is available at htpp://ssrn.com/abstract=1001990 (English version) and http://ssrn.com/abstract=1001991 (Russian version).

The Marketisation of European Corporate Control: A Critical Political Economy Perspective

We are entering into a new phase in EU corporate governance. More than ever, our action plan must be focused and based on a solid assessment of actual needs of market players and investors. 1 As Ch...

Takeover Regulation- through the Regulatory Looking Glass

As the Action Plan on Modernising Company Law and Enhancing Corporate Governance in the European Union (2003) makes clear, the EU has sought to develop company and securities law as vital pillars of an overall attempt to improve Europe's international competitiveness. An important part of this is the creation of an integrated capital market in the EU. The regulation of takeover bids was deemed to be a key element of such an integrated market. This paper will focus on Directive 2004/25/EC on Takeover Bids and will seek to examine it under the regulatory microscope. It is too early to make a complete judgment about the Directive's effectiveness as a regulatory mechanism as this would involve determining whether it achieves its goals, secures high levels of compliance from Member States and market participants and is democratically accountable to the extent that its provisions affect the public interest. It is however possible to reflect upon some of its potential strengths and failings in respect of these criteria.