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Legal Models and Business Realities of Enterprise Groups - Mismatch and Change

Kurt A. Strasser

University of Connecticut School of Law

Phillip I. Blumberg

University of Connecticut - School of Law

July 29, 2009

CLPE Research Paper No. 18/2009

Although conducted world-wide through hundreds of subsidiaries and affiliates, modern large business is, in economic reality, typically a single economically integrated enterprise functioning with a common objective under the control of its parent company. Yet the prevailing legal models are, for the most part, oblivious to this. Mistakenly adopting outmoded concepts inherited from the misty past, these models focus on many separate subsidiary corporations that make up the business and necessarily overlook the larger whole. The result of this outdated view is a mismatch between business reality and legal form which has led so frequently to poor legal and regulatory decision-making and ineffectual public control. While there is change stirring today, overall the law’s response to this mismatch has been piecemeal and unsystematic. After reviewing how we got to this unhappy point, this paper will sketch out a new legal theory of enterprise analysis as the basis of modern corporation law to serve the needs of the Twenty-First Century. In some areas it will replace and in other areas it will supplement existing legal models. Enterprise analysis focuses on the implementation of the underlying policies and rules of the specific body of law at issue, such as securities, tax, or bankruptcy, to determine whether the objectives of that body of law are better served in the specific matter by looking to the whole enterprise or, alternatively, to the particular corporate subsidiary entities involved. While overt recognition of this enterprise analysis has been limited, the American legal system today is in fact applying it in numerous areas.

Number of Pages in PDF File: 28

Keywords: Corporate limited liability, corporate groups, multinational companies, shareholder liability, enterprise liability

JEL Classification: K22, K13, L22, L53

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Date posted: July 30, 2009  

Suggested Citation

Strasser, Kurt A. and Blumberg, Phillip I., Legal Models and Business Realities of Enterprise Groups - Mismatch and Change (July 29, 2009). CLPE Research Paper No. 18/2009. Available at SSRN: https://ssrn.com/abstract=1440858 or http://dx.doi.org/10.2139/ssrn.1440858

Contact Information

Kurt A. Strasser (Contact Author)
University of Connecticut School of Law ( email )
65 elizabeth St
Hartford, CT 06109
United States
Phillip I. Blumberg
University of Connecticut - School of Law ( email )
65 Elizabeth Street
Hartford, CT 06105
United States
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