The Taxonomy of the Modern Company

Watson SM and Vasudev PM Innovations in Corporate Governance (2017, Edward Elgar)

19 Pages Posted: 25 Apr 2017

See all articles by Susan Watson

Susan Watson

University of Auckland Business School; European Corporate Governance Institute

Date Written: April 23, 2017


Mystery is at the core of corporate law. The first question in corporate law is also the last: what is a company? It is a question that the legal philosopher HLA Hart (1983, 23) would prefer we did not ask, but given the centrality of companies to modern life, we cannot help ourselves as long as the fundamental issue of their essential nature remains contested.

This chapter uses a historical lens in an attempt to identify what exactly a company is. It concludes that the modern company is a legal person that is an entity created by statute comprising a fund. The chapter shows that the modern form of the company as separate from shareholders is a consequence of default limited liability being granted in the mid-nineteenth century, although its consequences and benefits were not fully realized until later in the century. This analysis focuses on the English story but is of wider interest because the development of the modern business corporation followed a broadly parallel path in most jurisdictions.

Keywords: corporate law, corporate governance corporate theory, legal history, limited liability

JEL Classification: G30, K10, K20

Suggested Citation

Watson, Susan Mary, The Taxonomy of the Modern Company (April 23, 2017). Watson SM and Vasudev PM Innovations in Corporate Governance (2017, Edward Elgar), Available at SSRN:

Susan Mary Watson (Contact Author)

University of Auckland Business School ( email )

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Private Bag 92019
Auckland, 1010
New Zealand

European Corporate Governance Institute ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

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