How the Company Became an Entity: A New Understanding of Corporate Law

Journal of Business Law 120, 2015

24 Pages Posted: 23 Mar 2015

See all articles by Susan Watson

Susan Watson

University of Auckland Faculty of Law; University of Auckland - Business School; European Corporate Governance Institute

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

Suggested Citation

Watson, Susan Mary, How the Company Became an Entity: A New Understanding of Corporate Law (March 17, 2015). Journal of Business Law 120, 2015, Available at SSRN:

Susan Mary Watson (Contact Author)

University of Auckland Faculty of Law ( email )

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Auckland Mail Centre
Auckland, 1142
New Zealand

University of Auckland - Business School ( email )

Auckland, 1010
New Zealand

European Corporate Governance Institute ( email )

c/o the Royal Academies of Belgium
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1000 Brussels

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