Corporate and Commercial Law

Corporate and commercial law governs business organizations and transactions — companies, their governance, and the law of commerce.

Scope

It covers company formation and the corporate form, corporate governance and directors' duties, securities, and commercial transactions.

Core questions

• How is the corporation legally structured?
• Who controls the corporation and in whose interest?
• How are directors' and shareholders' rights balanced?
• How does law facilitate commerce?

Key concepts

• The corporate form
• Limited liability
• Corporate governance
• Separation of ownership and control
• Directors' duties
• Agency costs

Key theories

Separation of ownership and control

Berle and Means showed that in the modern corporation, dispersed shareholders cede control to managers.

Agency theory of the firm

Jensen and Meckling analysed the corporation as a nexus of contracts with agency costs, shaping corporate governance.

History

Corporate law theory was framed by Berle and Means's analysis of ownership and control and transformed by the law-and-economics agency-cost approach (Jensen & Meckling), central to modern corporate-governance debate.

Debates

Shareholder versus stakeholder governance

Whether corporations should be run for shareholders or a broader set of stakeholders.

Key figures

• Adolf Berle
• Gardiner Means
• Michael Jensen
• William Meckling

Seminal works

• berle-means-1932
• jensen-meckling-1976

Frequently asked questions

What is the separation of ownership and control?

Berle and Means's observation that in large corporations, ownership (dispersed shareholders) is separated from control (professional managers).