Legal Capital: An Outdated Concept?
John Armour
University of Oxford - Faculty of Law; University of Oxford - Said Business School; European Corporate Governance Institute (ECGI)
European Business Organization Law Review, Forthcoming
Abstract:
This paper reviews the case for and against mandatory legal capital rules in European corporate codes. It is argued that legal capital is no longer an appropriate means of safeguarding creditors' interests. This is most clearly the case as regards mandatory rules. Moreover, it is suggested that even an 'opt in' (or default) legal capital regime is unlikely to be a useful mechanism. However, the advent of regulatory arbitrage in European corporate law will provide a way of gathering information regarding investors' preferences in relation to such rules. Those creditor protection rules that do not further the interests of adjusting creditors will become subject to competitive pressures. Legislatures will be faced with the task of designing mandatory rules to deal with the issues raised by 'non-adjusting' creditors in a proportionate and effective manner, consistent with the Gebhard formula.
Number of Pages in PDF File: 18
Keywords: G32, G38, K12, K22
JEL Classification: Corporate Law, Creditor Protection, Legal Capital
Accepted Paper Series
Suggested Citation
Armour, John, Legal Capital: An Outdated Concept?. European Business Organization Law Review, Forthcoming. Available at SSRN: http://ssrn.com/abstract=910826
