Pub Date : 2021-10-21DOI: 10.1093/oso/9780198858874.003.0001
Eva Micheler
This chapter provides an overview of a real entity theory of company law. It begins by exploring three main theories of the company. The first theory explains the company as a contract; it forms the basis on which agency theory builds. The second theory conceives the company as a concession of the state, while the third theory characterizes the company as a real entity. The chapter then looks at a modern version of real entity theory and its application to company law. According to real entity theory, organizations or firms are social phenomenon outside of the law and they are autonomous actors in their own right. This occurs because human beings change their behaviour when they act as members of a group or an organization. Company law finds this phenomenon and evolves with a view to supporting autonomous action by organizations.
{"title":"A Real Entity Theory of Company Law","authors":"Eva Micheler","doi":"10.1093/oso/9780198858874.003.0001","DOIUrl":"https://doi.org/10.1093/oso/9780198858874.003.0001","url":null,"abstract":"This chapter provides an overview of a real entity theory of company law. It begins by exploring three main theories of the company. The first theory explains the company as a contract; it forms the basis on which agency theory builds. The second theory conceives the company as a concession of the state, while the third theory characterizes the company as a real entity. The chapter then looks at a modern version of real entity theory and its application to company law. According to real entity theory, organizations or firms are social phenomenon outside of the law and they are autonomous actors in their own right. This occurs because human beings change their behaviour when they act as members of a group or an organization. Company law finds this phenomenon and evolves with a view to supporting autonomous action by organizations.","PeriodicalId":10779,"journal":{"name":"Company Law","volume":"8 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-10-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"74298673","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-10-21DOI: 10.1093/oso/9780198858874.003.0010
Eva Micheler
This chapter highlights how the law gives shareholders more influence than creditors, employees, or other constituencies, but also how the interests of these stakeholders are integrated into company law. Three normative conclusions flow from the theoretical perspective advanced in this book. The first is that we should give up on the idea that financial incentives can serve interests other than those of the directors. Second, programmatic statements encouraging companies to have a purpose or encouraging directors to consider stakeholder interests in the same way as shareholder interests are unlikely to have much effect. Third, if there is a desire to further integrate non-shareholder interests into company law, this is, from the perspective of this book, best achieved through an integration of their interests into the decision-making process of the company. An example of such an intervention can be found in the UK Corporate Governance Code which recommends the integration of work-force related concerns through a director appointed from the workforce, a formal workforce advisory panel, or a designated non-executive director.
{"title":"Stakeholders","authors":"Eva Micheler","doi":"10.1093/oso/9780198858874.003.0010","DOIUrl":"https://doi.org/10.1093/oso/9780198858874.003.0010","url":null,"abstract":"This chapter highlights how the law gives shareholders more influence than creditors, employees, or other constituencies, but also how the interests of these stakeholders are integrated into company law. Three normative conclusions flow from the theoretical perspective advanced in this book. The first is that we should give up on the idea that financial incentives can serve interests other than those of the directors. Second, programmatic statements encouraging companies to have a purpose or encouraging directors to consider stakeholder interests in the same way as shareholder interests are unlikely to have much effect. Third, if there is a desire to further integrate non-shareholder interests into company law, this is, from the perspective of this book, best achieved through an integration of their interests into the decision-making process of the company. An example of such an intervention can be found in the UK Corporate Governance Code which recommends the integration of work-force related concerns through a director appointed from the workforce, a formal workforce advisory panel, or a designated non-executive director.","PeriodicalId":10779,"journal":{"name":"Company Law","volume":"28 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-10-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"85075729","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-10-21DOI: 10.1093/oso/9780198858874.003.0007
Eva Micheler
This chapter describes the role of the directors. The duties of the directors are owed to the company and while the shareholders are the primary indirect beneficiaries of those duties, the law integrates the interests of creditors and also of wider society. The law is primarily focused on ensuring compliance with the Companies Act and the constitution rather than with the enhancement of economic interests. The Company Directors Disqualification Act 1986 serves as a mechanism through which the public interest is integrated into company law, while the UK Corporate Governance Code adds a further procedural dimension to the operation of the board of directors. The chapter then looks at how the idea of designing remuneration in a way that guides the directors to act either for the benefit of the shareholder or for the benefit of the company is flawed and has served as a motor justifying increasing rewards without bringing about commensurate increases in performance. It also analyses the duties of the directors to keep accounting records and to produce financial reports.
{"title":"The Role of the Directors","authors":"Eva Micheler","doi":"10.1093/oso/9780198858874.003.0007","DOIUrl":"https://doi.org/10.1093/oso/9780198858874.003.0007","url":null,"abstract":"This chapter describes the role of the directors. The duties of the directors are owed to the company and while the shareholders are the primary indirect beneficiaries of those duties, the law integrates the interests of creditors and also of wider society. The law is primarily focused on ensuring compliance with the Companies Act and the constitution rather than with the enhancement of economic interests. The Company Directors Disqualification Act 1986 serves as a mechanism through which the public interest is integrated into company law, while the UK Corporate Governance Code adds a further procedural dimension to the operation of the board of directors. The chapter then looks at how the idea of designing remuneration in a way that guides the directors to act either for the benefit of the shareholder or for the benefit of the company is flawed and has served as a motor justifying increasing rewards without bringing about commensurate increases in performance. It also analyses the duties of the directors to keep accounting records and to produce financial reports.","PeriodicalId":10779,"journal":{"name":"Company Law","volume":"32 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-10-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73006642","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-10-21DOI: 10.1093/oso/9780198858874.003.0005
Eva Micheler
This chapter evaluates the rules that determine the attribution of the actions of human actors to companies. These contain elements that demonstrate that company law is designed for the operation of organizations and that therefore a real entity theory is best suited to explain the law as it stands, and also to formulate normative recommendations. Indeed, conceiving companies as serving real entities helps to explain the approach taken by the law in relation to corporate criminal liability. Companies are actors whose acts are sometimes determined by their shareholders and directors. But they do not fully control what companies do. Companies act autonomously through habits and procedures that have formed between the individuals who act for and contribute to them. These procedures cause companies to become independent of their individual actors and can lead to blameworthy conduct.
{"title":"Corporate Actions","authors":"Eva Micheler","doi":"10.1093/oso/9780198858874.003.0005","DOIUrl":"https://doi.org/10.1093/oso/9780198858874.003.0005","url":null,"abstract":"This chapter evaluates the rules that determine the attribution of the actions of human actors to companies. These contain elements that demonstrate that company law is designed for the operation of organizations and that therefore a real entity theory is best suited to explain the law as it stands, and also to formulate normative recommendations. Indeed, conceiving companies as serving real entities helps to explain the approach taken by the law in relation to corporate criminal liability. Companies are actors whose acts are sometimes determined by their shareholders and directors. But they do not fully control what companies do. Companies act autonomously through habits and procedures that have formed between the individuals who act for and contribute to them. These procedures cause companies to become independent of their individual actors and can lead to blameworthy conduct.","PeriodicalId":10779,"journal":{"name":"Company Law","volume":"31 6 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-10-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"82851700","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-10-21DOI: 10.5040/9781784514396.chapter-004
This chapter discusses how separate legal personality can be explained as a solution developed by company law to address the problem that organizations are social rather than brute facts. For a company to come into existence, certain documents need to be registered. These contain information that facilitates the interaction between the company and third parties. Registration as a company then gives an organization a public legal manifestation. The Companies Act does not limit the corporate form to organizational action. The corporate form can therefore be used for other purposes and organizational boundaries do not align with legal personality. But this does not undermine the observation that company law is designed for the operation of organizations.
{"title":"Corporate Personality","authors":"","doi":"10.5040/9781784514396.chapter-004","DOIUrl":"https://doi.org/10.5040/9781784514396.chapter-004","url":null,"abstract":"This chapter discusses how separate legal personality can be explained as a solution developed by company law to address the problem that organizations are social rather than brute facts. For a company to come into existence, certain documents need to be registered. These contain information that facilitates the interaction between the company and third parties. Registration as a company then gives an organization a public legal manifestation. The Companies Act does not limit the corporate form to organizational action. The corporate form can therefore be used for other purposes and organizational boundaries do not align with legal personality. But this does not undermine the observation that company law is designed for the operation of organizations.","PeriodicalId":10779,"journal":{"name":"Company Law","volume":"732 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-10-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"74771440","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-10-21DOI: 10.1093/oso/9780198858874.003.0008
Eva Micheler
This chapter explores the role of the shareholders, who have substantial influence over the company. UK company law is shareholder-centred, but it would be wrong to conclude that shareholders are the principals of the directors or of the company. Shareholders normally appoint the directors and auditors, and they have a mandatory power to remove them. The shareholders are also responsible for approving certain transactions, including share issues, takeover defences, political donations, provisions made for employees on the cessation of business, and (under the Listing Rules) certain large transactions. Taken together, these powers give the shareholders significant influence over the management of the company. The rights of shareholders are, however, also subject to constraints. These constraints operate for the benefit of minority shareholders and creditors. The chapter then examines the UK Stewardship Code, through which the government attempts to exercise pressure on institutional shareholders to refrain from requesting short-term return. It also analyses the reflective loss principle, which restricts shareholders in pursuing damages claims against third parties in circumstances where the company has a competing claim.
{"title":"The Role of the Shareholders","authors":"Eva Micheler","doi":"10.1093/oso/9780198858874.003.0008","DOIUrl":"https://doi.org/10.1093/oso/9780198858874.003.0008","url":null,"abstract":"This chapter explores the role of the shareholders, who have substantial influence over the company. UK company law is shareholder-centred, but it would be wrong to conclude that shareholders are the principals of the directors or of the company. Shareholders normally appoint the directors and auditors, and they have a mandatory power to remove them. The shareholders are also responsible for approving certain transactions, including share issues, takeover defences, political donations, provisions made for employees on the cessation of business, and (under the Listing Rules) certain large transactions. Taken together, these powers give the shareholders significant influence over the management of the company. The rights of shareholders are, however, also subject to constraints. These constraints operate for the benefit of minority shareholders and creditors. The chapter then examines the UK Stewardship Code, through which the government attempts to exercise pressure on institutional shareholders to refrain from requesting short-term return. It also analyses the reflective loss principle, which restricts shareholders in pursuing damages claims against third parties in circumstances where the company has a competing claim.","PeriodicalId":10779,"journal":{"name":"Company Law","volume":"12 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-10-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81425775","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-10-21DOI: 10.1093/oso/9780198858874.003.0011
Eva Micheler
This concluding chapter summarizes how the previous chapters explained company law through a real entity theory. According to this theory, the law does not create organizations but finds them as a real social phenomenon. When human beings interact, habits, routines, processes, and procedures form. These affect the way participants of an organization act and so are real in their consequences. Organizations are characterized by this social structure. There also exists individual agency, which enables participants to deviate from the social structure and over time also to modify it. At a positive level, company law can be explained as making it easier for organizations to act autonomously and also as supplying a decision-making process that assigns roles to directors, shareholders, auditors, and a company secretary. Not all organizations are companies and not every company operates as an organization. Company law is nevertheless designed with a view to facilitating autonomous organizational action.
{"title":"Conclusions","authors":"Eva Micheler","doi":"10.1093/oso/9780198858874.003.0011","DOIUrl":"https://doi.org/10.1093/oso/9780198858874.003.0011","url":null,"abstract":"This concluding chapter summarizes how the previous chapters explained company law through a real entity theory. According to this theory, the law does not create organizations but finds them as a real social phenomenon. When human beings interact, habits, routines, processes, and procedures form. These affect the way participants of an organization act and so are real in their consequences. Organizations are characterized by this social structure. There also exists individual agency, which enables participants to deviate from the social structure and over time also to modify it. At a positive level, company law can be explained as making it easier for organizations to act autonomously and also as supplying a decision-making process that assigns roles to directors, shareholders, auditors, and a company secretary. Not all organizations are companies and not every company operates as an organization. Company law is nevertheless designed with a view to facilitating autonomous organizational action.","PeriodicalId":10779,"journal":{"name":"Company Law","volume":"51 8","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-10-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"72570068","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-10-21DOI: 10.1093/oso/9780198858874.003.0003
Eva Micheler
This chapter examines the ultra vires doctrine, under which the capacity of companies used to be limited by the objects stated in their memorandum. This doctrine could be justified through a concession style argument as well as through contractual analysis. The doctrine, however, proved unsuitable for the operation of commercial organizations. These organizations need flexibility, and the law adapted to the requirements of organizational action and now mandates that all non-charitable companies have unlimited capacity. The chapter then analyses the recent recommendation for companies to set themselves a purpose discouraging them form making the generation of financial return their primary objective. It argues that the programmatic statement of a corporate purpose is likely to bring about only cosmetic changes. If there is a desire for wider aims to be integrated into corporate decisions these would have to be institutionalized. This can be achieved, for example, by identifying a board member to represent these interests on the board.
{"title":"Corporate Capacity","authors":"Eva Micheler","doi":"10.1093/oso/9780198858874.003.0003","DOIUrl":"https://doi.org/10.1093/oso/9780198858874.003.0003","url":null,"abstract":"This chapter examines the ultra vires doctrine, under which the capacity of companies used to be limited by the objects stated in their memorandum. This doctrine could be justified through a concession style argument as well as through contractual analysis. The doctrine, however, proved unsuitable for the operation of commercial organizations. These organizations need flexibility, and the law adapted to the requirements of organizational action and now mandates that all non-charitable companies have unlimited capacity. The chapter then analyses the recent recommendation for companies to set themselves a purpose discouraging them form making the generation of financial return their primary objective. It argues that the programmatic statement of a corporate purpose is likely to bring about only cosmetic changes. If there is a desire for wider aims to be integrated into corporate decisions these would have to be institutionalized. This can be achieved, for example, by identifying a board member to represent these interests on the board.","PeriodicalId":10779,"journal":{"name":"Company Law","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-10-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90485506","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-10-21DOI: 10.1093/oso/9780198858874.003.0009
Eva Micheler
This chapter studies the rules governing the enforcement of the duties imposed on directors, distinguishing between private and public enforcement. Directors owe their duties to the company and so the company is responsible for enforcing these duties. The law prefers such litigation decisions to be taken by the company through its normal process. The courts only interfere if that process cannot be made to work independently of the wrong-doers. It is unlikely for a derivative claim to succeed against the wishes of an independent majority and so it is right to observe that the shareholders are the main focus of the law. But here too the law is more nuanced and integrates the interests of minority shareholders and creditors. The duties of the directors are also enforced through the means of public law. The chapter then shows that public law sanctions particularly attach in relation to duties that enhance the interest of third parties interacting with the company. This leads to the conclusion that these interests are at least formally better protected than those of the shareholders.
{"title":"Enforcement","authors":"Eva Micheler","doi":"10.1093/oso/9780198858874.003.0009","DOIUrl":"https://doi.org/10.1093/oso/9780198858874.003.0009","url":null,"abstract":"This chapter studies the rules governing the enforcement of the duties imposed on directors, distinguishing between private and public enforcement. Directors owe their duties to the company and so the company is responsible for enforcing these duties. The law prefers such litigation decisions to be taken by the company through its normal process. The courts only interfere if that process cannot be made to work independently of the wrong-doers. It is unlikely for a derivative claim to succeed against the wishes of an independent majority and so it is right to observe that the shareholders are the main focus of the law. But here too the law is more nuanced and integrates the interests of minority shareholders and creditors. The duties of the directors are also enforced through the means of public law. The chapter then shows that public law sanctions particularly attach in relation to duties that enhance the interest of third parties interacting with the company. This leads to the conclusion that these interests are at least formally better protected than those of the shareholders.","PeriodicalId":10779,"journal":{"name":"Company Law","volume":"1652 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-10-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"76291759","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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