An Analysis of Close Corporation Legislation in the United States
Arizona State Law Journal, Vol. 21, p. 663, 1989
42 Pages Posted: 29 May 2009
Date Written: 1989
Some ten years ago this author analyzed the trend toward the adoption of special legislation aimed at solving the problems of the closely held corporation. I argued that an attempt at statutory resolution was fundamentally misguided, in that a dual corporation law regime, that is, separate statutory schemes for general and close corporations, would provide at best limited benefits while creating potentially serious problems. Those views, however, have remained a distinct minority among academicians, and the state legislative trend toward a dual regime has continued unabated. Even the 1984 revisers of the Model Business Corporation Act, whose drafters saw no need for special legislation at the time of the 1969 revision of the Act, have proposed a Model Statutory Close Corporation Supplement for jurisdictions that want to distinguish statutorily between ordinary corporations and so-called close corporations. As states consider and adopt versions of the revised Model Act, many are likely to adopt the Model Supplement as well.
These developments as well as recent court decisions in both single and dual regimes cast new light on the analytical problems inherent in legislating separately for close corporations. This article reconsiders the case for special close corporation legislation against the background of close corporation statutes adopted to date and judicial interpretations of both the general and the special statutes. The article concludes that the case against special close corporation legislation is even stronger than it was ten years ago.
Keywords: Close Corporations, Special Close Corporation Legislation, Model Statutory Close Corporation Supplement
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