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Talbot on the Contractual Model of the Firm

By Lawrence Solum

Lorraine E. Talbot (University of Warwick) has posted The Contractual Model of the Company: A Critical Appraisal (CRITICAL COMPANY LAW, Chapter 3, Routledge-Cavendish 2008) on SSRN. Here is the abstract:

The purpose of this chapter is to examine critically the use of the contractual model in both company law scholarship and in the black letter law pertaining to the relationship of members to the company and to each other. It will be argued that such contractual elements that do persist in this area of company law are small residues from companies? historical relationship with partnership law. Furthermore, it will be argued that while these residues may continue to have some significance in respect of companies that are in both management and ownership terms much more like a partnership, they have no application in larger companies. In cases involving small companies, decisions may be made which indicate a direct contractual relationship between the parties which are not mediated through the company but such decisions will only be applicable in small quasi-partnership arrangements. It will finally be demonstrated through case law and statute that the company constitution is heavily prescribed by statute and any choices that are made by the incorporators are made within a strict statutory framework. This is particularly true in respect of public companies, where wide-ranging restrictions ensure the public nature of the PLC.

Full post as published by Legal Theory Blog on December 10, 2009 (boomark / email).