Economic Efficiency and the Proceduralisation of Company Law

Abstract

This paper extends the analysis carried out by the authors for the UK Law Commissions and published as Part 3 of the joint "Consultation Paper on Directors' Duties" (1998). After considering some of the potential uses of economics in company law, the paper develops a theoretical framework which relates company law to a wider set of corporate governance mechanisms that operate to mitigate risk and uncertainty in contractual relations. This framework is then applied to provisions relating to self-dealing and conflicts of interests under Part X of the Companies Act 1985. It is argued that in this and related contexts, the economic role of company law should be seen as promoting cooperation and the sharing of information and risk between corporate actors, a function described in terms of the 'proceduralisation' of company law.