Myth of Shareholder Primacy in English Law

21 Pages Posted: 21 Feb 2014

Date Written: 2013


By virtue of section 172 of the Companies Act 2006, the concept of Enlightened Shareholder Value, which is an extension of Shareholder Primacy norm, is now enshrined into English law as the basis of corporate governance. Prior to the Companies Act 2006, much was written about shareholder primacy, which assumed it to be the basis of corporate governance in English law. But what has rarely been discussed is the validity of that assumption. Was shareholder primacy a legal norm in English law prior to the Companies Act 2006? Did the case law that are purported to have supported shareholder primacy really support it? In testing the validity of the shareholder primacy assumption, this article examines its purported legal sources rather than its merits. The ultimate shareholder primacy norm is that directors are agents of shareholders, and that directors are under fundamental obligation to run the company in the interest of the shareholders. This article finds that directors owed no such legal obligation to shareholders, that the confusion was based on the historical application of partnership principles to company law, and that a contextual reading of case law reveals that the theory would have been at odds with the elementary tenet of corporate legal personality. This article also finds that although shareholder primacy norm has since been enshrined in the Companies Act 2006, albeit as Enlightened Shareholder Value, it remains at odds with the legal personality tenet and provides a right without corresponding legal remedy.

Keywords: company law, shareholder primacy, enlightened shareholder value

JEL Classification: K22

Suggested Citation

Mukwiri, Jonathan, Myth of Shareholder Primacy in English Law (2013). European Business Law Review, Vol. 24, No. 2, pp. 217-241, 2013, Available at SSRN:

Jonathan Mukwiri (Contact Author)

Durham University - Law School ( email )

The Palatine Centre
Stockton Road
Durham, County Durham DH1 3LE
United Kingdom


Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics