The Proprietary Foundations of Corporate Law

Posted: 24 Jun 2008

See all articles by John Armour

John Armour

University of Oxford - Faculty of Law; European Corporate Governance Institute (ECGI)

Michael J. Whincop

Griffith University - Griffith Law School

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Date Written: Autumn 2007


Recent work in both the theory of the firm and of corporate law has called into question the appropriateness of analysing corporate law as merely a set of standard form contracts. This article develops these ideas by focusing on property law's role in underpinning corporate enterprise. Rights to control assets are a significant mechanism of governance in the firm. However, their use in this way predicates some arrangement for stipulating which parties will have control under which circumstances. It is argued that property rules a category whose scope is determined functionally protect the entitlements of parties to such sharing arrangements against each other's opportunistic attempts to grant conflicting entitlements to third parties. At the same time, the legal system uses a range of strategies to minimize the costs such protection imposes on third parties. The choice of strategy significantly affects co-owners freedom to customize their control-sharing arrangements. This theory is applied to give an account of the proprietary foundations of corporate law, which has significant implications for the way in which the subject's functions are understood and evaluated.

Suggested Citation

Armour, John and Whincop, Michael J., The Proprietary Foundations of Corporate Law (Autumn 2007). Oxford Journal of Legal Studies, Vol. 27, Issue 3, pp. 429-465, 2007, Available at SSRN: or

John Armour (Contact Author)

University of Oxford - Faculty of Law ( email )

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European Corporate Governance Institute (ECGI) ( email )

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Michael J. Whincop

Griffith University - Griffith Law School ( email )

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+617 3875 5599 (Fax)

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