What is Corporate Law?
Yale Law School; European Corporate Governance Institute (ECGI)
Harvard Law School; European Corporate Governance Institute
Feb 25, 2004
Yale Law & Economics Research Paper No. 300
This article is the first chapter of a book authored by R. Kraakman, P. Davies, H. Hansmann, G. Hertig, K. Hopt, H. Kanda, and E. Rock, "The Anatomy of Corporate Law: A Comparative and Functional Approach," (Oxford University Press 2004). The book as a whole provides a functional analysis of corporate (or company) law in Europe, the U.S., and Japan. Its organization reflects the structure of corporate law across all jurisdictions, while individual chapters explore the diversity of jurisdictional approaches to the common problems of corporate law.
As the introductory chapter to the book, this paper introduces the book’s analytic framework, which focuses on the common structure of corporate law across different jurisdictions as a response to fundamentally similar legal and economic problems. It first details the economic importance of the corporate form’s hallmark features: legal personality, limited liability, transferable shares, delegated management, and investor ownership. The major agency problems that attend the corporate form and that, therefore, must be addressed, are identified. The chapter next considers the role of law and contract in structuring corporate affairs, including the function of mandatory and default rules, standard forms, and choice of law, as well the debate about the proper role of corporate law in promoting overall social welfare. While almost all legal systems retain the core features of the corporate form, individual jurisdictions have made distinct choices regarding many other aspects of their corporate laws. The forces shaping the development of corporate law, including evolving
patterns of share ownership, are examined.
In addition to Chapter 1, Chapter 2 of the Anatomy of Corporate Law, "Agency Problems and Legal Strategies" is available (full text) on the SSRN.
The abstracts for Chapter 3: The Basic Governance Structure; Chapter 4: Creditor protection (http://ssrn.com/abstract=568823); Chapter 5: Related Party Transactions; Chapter 6: Significant Corporate Actions; Chapter 7: Control Transactions; Chapter 8: Issuers and Investor Protection; Chapter 9: Beyond the Anatomy are also/will be available on the SSRN.
Number of Pages in PDF File: 21
Keywords: legal personality, limited liability, transferable shares, delegated management, investor ownership, agency problems, default and mandatory rules, choice of law, share ownership
JEL Classification: D23, G32, G34, G38, K22, M14
Date posted: July 27, 2004 ; Last revised: January 26, 2017