The Essential Elements of Corporate Law - What is Corporate Law? - Discussion Paper No. 643 - 7/2009

Oct 22, 2026

Uploaded by James

The paper presents the introductory chapter to a revised and expanded second edition of The Anatomy of Corporate Law, offering a functional analysis of corporate (company) law across Europe, the U.S., and Japan. It explains how corporate law defines the functions and boundaries of the corporate form, emphasizing core features such as legal personality, limited liability, transferable shares, delegated management, and investor ownership. It then analyzes agency problems and the legal tools—standardization, mandatory rules, and regulatory competition—used to address them.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages32

Reading Time1 h 21 min

AccessFree to download

What is Corporate Law?

Introduction

Core legal characteristics of the business corporation

Functions and boundaries of corporate law

ISSN 1936-5349 (print) ISSN 1936-5357 (online) HARVARD JOHN M. OLIN CENTER FOR LAW, ECONOMICS, AND BUSINESS THE ESSENTIAL ELEMENTS OF CORPORATE LAW: WHAT IS CORPORATE LAW? John Armour, Henry Hansmann, Reinier Kraakman Discussion Paper No. 643 7/2009 Harvard Law School Cambridge, MA 02138 This paper can be downloaded without charge from: The Harvard John M. Olin Discussion Paper Series: [http://www.law.harvard.edu/programs/olin_center/](http://www.law.harvard.edu/programs/olin_center/) The Social Science Research Network Electronic Paper Collection: [http://papers.ssrn.com/abstract_id=\#\#\#\#\#\#\#](http://papers.ssrn.com/abstract_id=#######) This paper is also a discussion paper of the John M. Olin Center’s Program on Corporate Governance. The Essential Elements of Corporate Law What is Corporate Law? John Armour University of Oxford-Faculty of Law; Oxford-Man Institute of Quantitative Finance; European Corporate Governance Institute (ECGI) Henry Hansmann Yale Law School; European Corporate Governance Institute (ECGI) Reinier Kraakman Harvard Law School; John M. Olin Center for Law; European Corporate Governance Institute Abstract: This article is the first chapter of the second edition of The Anatomy of Corporate Law: A Comparative and Functional Approach, by Reinier Kraakman, John Armour, Paul Davies, Luca Enriques, Henry Hansmann, Gerard Hertig, Klaus Hopt, Hideki Kanda and Edward Rock (Oxford University Press, 2009) . 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. In its second edition, the book has been significantly revised and expanded. As the book's introductory chapter, this article describes the functions and boundaries of corporate law. We first detail the economic importance of the corporate form's hallmark features: legal personality, limited liability, transferable shares, delegated management, and investor ownership. We then identify the major agency problems that attend the corporate form, and that, therefore, corporate law must address: conflicts between managers and shareholders, between controlling and minority shareholders, and between shareholders as a class and non-shareholder constituencies of the firm such as creditors and employees. In our view, corporate law serves in part to accommodate contract and property law to the corporate form and, in substantial part, to address the agency problems that are associated with this form. We next consider the role of law in structuring corporate affairs so as to achieve these goals: whether, and to what extent standard forms-as opposed, on the one hand, to private contract, and on the other, to mandatory rules-are needed, and the role of regulatory competition. Whilst the ‘core’ features of corporate law are present in all-or almost all-legal systems, different systems have made different choices regarding the form and content of many other aspects of their corporate laws. To assist in explaining these, we review a range of forces that shape the development of corporate law, including domestic share ownership patterns. These forces operate differently across countries, implying that in some cases, complementary differences in corporate laws are functional. However, other such differences may be better explained as a response to purely distributional concerns. JEL Classifications: D23, G32, G34, G38, K22, M14 1 What is Corporate Law? © 2009 JOHN ARMOUR, HENRY HANSMANN, and REINIER KRAAKMAN 1.1 INTRODUCTION What is the common structure of the law of business corporations—or, as it would be put in some jurisdictions, company law—across different national jurisdictions? Although this question is rarely asked by corporate law scholars, it

FAQs

What are the core legal characteristics of the business corporation described in the introduction?

The paper identifies five characteristics: legal personality, limited liability, transferable shares, delegated management under a board structure, and investor ownership.

Why does corporate law have a principal function according to the paper?

Corporate law supplies business enterprises with a legal form that includes these five core attributes, enabling entrepreneurs to transact through the corporate entity in a widely available and user-friendly way.

Which major agency problems must corporate law address?

It must address conflicts between managers and shareholders, between controlling and minority shareholders, and between shareholders and non-shareholder constituencies such as creditors and employees.

Oct 22, 2026

Uploaded by James