How the Company Became an Entity: A New Understanding of Corporate Law
Journal of Business Law 120, 2015
24 Pages Posted: 23 Mar 2015
Date Written: March 17, 2015
This paper argues for an entity-based understanding of the modern company, recognising capital was severed from the holders of shares with the advent of limited liability. This division was instrumental in the development of the modern company and was implicitly recognised in Salomon. The modern company is an entity created by statute comprising a capital fund normatively controlled by the board of directors. Shareholders’ ownership rights are so attenuated in the modern company that shareholders are significant only because collectively, or individually with a block of shares, they can exercise indirect control. The focus when regulating companies should therefore be on control.
Keywords: corporate; corporation; corporate theory; corporate history; entity; corporate form; company
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