Contractual Flexibility within the Common Law: Organizing Private Companies in Britain and the United States

Abstract

There is now a large literature arguing that shareholders are better protected against abuse by corporate insiders in common-law than in civil-law countries, especially those with legal systems modeled on the French code. There is also a growing literature critiquing this view, to which we have contributed. In this paper we continue that work of criticism by questioning the idea that common law countries followed broadly similar legal trajectories. In particular, we show that corporate law developed in a fundamentally different way in Britain than in the United States, so that founders of British corporations had much more contractual freedom than their counterparts in the U.S.