Company Law - A Real Entity Theory

37 Pages Posted: 22 Mar 2021 Last revised: 13 Jun 2021

See all articles by Eva Micheler

Eva Micheler

London School of Economics - Law School

Date Written: April 14, 2021


This book advances an entity theory of company law. It builds on the insight that organizations or firms are autonomous actors in their own right. They are more than the sum of the contributions of their participants. They also act independently of the views and interests of their participants. This occurs because human beings change their behavior when they act as members of a group or an organization. In a group we tend to develop and conform to a shared standard. When we act in organizations routines and procedures form and a culture emerges. These over time take on a life of their own affecting the behavior of the participants. Participants can themselves affect organizational behavior and modify routines, procedures and culture but this takes time and effort.

Organizations are a social phenomenon outside of company law. Company law finds this phenomenon and provides it with a legal structure. It makes available legal personality and a procedural framework facilitating corporate decision making and corporate acting. Company law evolves with a view to supporting autonomous action through organizations.

It will be shown in this book that a framework that conceives companies as vehicles for autonomous organizational entities that are characterized by their routines, procedures and culture explains the law as it stands at a positive level. The framework also helps to formulate normative recommendations guiding law reform and judicial decision making.

An entity approach is sometimes associated with a normative argument advocating for more influence for stakeholders such as employees. This book does not take a position on the normative question whether stakeholders should have more influence than they currently have. The thesis of this book holds irrespective of how the law fine-tunes the influence over corporate decision making.

Keywords: company law, corporate law, agency theory, concession theory, real entity theory, corporate governance

JEL Classification: K22

Suggested Citation

Micheler, Eva, Company Law - A Real Entity Theory (April 14, 2021). Available at SSRN: or

Eva Micheler (Contact Author)

London School of Economics - Law School ( email )

Houghton Street
London WC2A 2AE, WC2A 2AE
United Kingdom

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