Share Law: Toward a New Understanding of Corporate Law
67 Pages Posted: 6 Dec 2018 Last revised: 25 Dec 2018
Date Written: November 29, 2018
Shares are an instrumental phenomenon in law, finance and modern life. Much of corporate law revolves around shares and shareholders, but our current understanding of shares is in a troubling posture: it resorts to various frameworks – contract, property, trust, and fiduciary law – neither of which can correctly accommodate the concept of shares. Contrary to prevailing notions, in both Delaware and other jurisdictions around the world, this Article proves that shareholders are not directly owed fiduciary duties; nor can they be simply described as contractual parties, due to the unique properties of shares as residual claims. Where do shares derive their value from? What rules and principles govern shares? The answer is that shares inhabit their own legal space. Weaving together corporate theory, doctrine, and real-life cases, this Article proposes the concept of share law, a new field of classification within corporate law. Share law, which is grounded in equity, provides the normative structure for conceptualizing, analyzing, and resolving share-related issues – including some very high-profile topics, such as dividends and buybacks, aspects of mergers and acquisitions, appraisal rights, multiple-class equity, shareholder voting and activism, and shareholder litigation. This Article presents a nuanced account, strongly supported both positively and normatively, of shares and their proper treatment within corporate and general law. In the process, it sheds new light on other areas in high currency, including corporate fiduciary law, corporate personhood, and the law of corporate purpose.
Keywords: corporate law, shares, shareholder rights, equity, contract law, property law, trust law, fiduciary law, share law, corporate theory, corporate personhood, corporate purpose
JEL Classification: K11, K12, K20, K22, G30, G34
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