Corporate Family Law

Abstract

There is no such thing as corporate family law. But there are corporate families, and corporate families fight. What happens when corporate family members fight and the conflict is so severe that one or more of the parties wants out of the corporate relationship? Corporate law provides some solutions, but they are shaped by the assumption that all parties will bargain effectively for protections when seeking to exit a corporate relationship. Under this theory, family business is, after all, just business. The problem with this assumption is that corporate family members do not bargain the way that corporate law expects. Corporate family members are idiosyncratic bargainers who operate from a position of bounded rationality and self-interest. Consequently, they are unlikely totake steps to protect themselves against corporate oppression. The result is a mismatch between corporate law and its underlying assumptions for a substantial swath of family business owners who are subject to corporate law and corporate oppression. Thus far, lawmakers have not looked to family law to solve this problem. This Article argues that they should.Family wealth laws—divorce and inheritance—offer an alternate model of asset allocation at the end of a relationship, providing robust financial protections for parties who are vulnerable in light of their idiosyncratic bargaining position. Such laws provide the theoretical foundation for a more realistic and fair conception of protection for corporate family members subject to corporate oppression. There may be no such thing as corporate family law, but there should be.

Keywords: Corporate Oppression, Minority Shareholder, Family Law, Marital Property, Elective Share, Bargaining, Rational Actor