Comparative Corporate Law: United States, European Union, China and Japan (Durham, N.C.: Carolina Academic Press, 2002) ISBN 0-89089-526-0; LCCN 2001088034.
This book studies the systems regulating the relationships between the primary participants in a corporation — shareholders, officers, directors — and the state in the most important commercial regions of the world today.
The book focuses on presenting differences in a number of significant areas of corporate governance, specifically, the formal sources of law, and the approach as manifest in actual regulation. The book also explores the ways different systems interact by looking at ways corporations created in one state are recognized and permitted to function in other states.
Comparative Corporate Law studies the differences between systems to determine the extent to which those differences are superficial, thus masking a common core of norms, or evidence of the existence of incompatible views. The ultimate aim is to understand the ways in which systems adjust to the existence of other, sometimes competitive, systems of corporate governance.
In an era of global trade, the power of harmonization, emulation, penetration, convergence, and separation, is inseparably linked to the comparative study of governance systems. Backer provides the framework for that study with clarity and attention to detail.
Summary of Book:
These materials are intended for a basic course in comparative corporate law. It also may be appropriate for use in courses taught overseas in short or semester long programs of study. These materials may be used either for a “lecture” course or as the basic readings of a seminar. Depending on the time available and the interest of the students and faculty, the course can utilize all of the materials, or it may limit its review to the United States and some, but not all of the other systems included in the materials. In past years, when teaching these materials in Europe, I have concentrated on the US and the EU and limited the discussion of issues of Chinese and Japanese law. Conversely, the course can emphasize the comparative study of US and Asian systems, minimizing the considerations of issues of European law.
The course is best utilized by students who have taken or are taking concurrently with it, a basic course in enterprise organization. However, there are enough materials provided so that even students who have not taken the basic course may profit from a study of these materials. The course materials are meant to provide a sound grounding for courses in international business transactions and international or cross border dispute resolution courses as well as provide a close study of materials usually treated lightly in Conflicts of Laws courses. The materials assume no familiarity with Japanese, Chinese, European national or EU law, but some familiarity with basic US law. For classes in which students have already taken a basic enterprise organization law course, the materials can be explored on a deeper level.
The materials are divided into eleven chapters. Chapters One and Two introduce the basic concepts which will be useful throughout the rest of the study. Chapter One introduces the student to the basic parameters of comparative law, and particularly, comparative law focused on issues of corporate governance. The materials provided introduce students to the basic themes and tensions in comparative study, with a focus on issues of enterprise governance. Chapter Two provides a very basic introduction to the political regimes of the governments that constitute the objects of study. In particular, there is a substantial amount of introductory material on the organization of the European Union, and the political and social organization of Japan and the People’s Republic of China. Because the assumption is that students know very little about the political or social organization of at least some for the countries or supra-national organizations studied, the materials cover much basic ground. To the extent that students are better grounded in this introductory material, teachers may choose to use the materials as a reference, referring back to it from time to time as needed, rather than teaching through it.
Chapter Three introduces the student to the regulatory context of enterprise organization. The first part of the chapter introduces the student to the patterns of formal organization of corporations, and the second part begins to consider the appropriate pattern of enterprise regulation. Particular emphasis is placed on a consideration of legal, economic and sociological characterizations of the corporation as a form of enterprise organization, and raises issues about the efficient regulation of these enterprises based on these characterizations. Introduced here also are issues of legal personality and their effects on regulatory regimes. Thus, these Chapters cover both the formal characteristics of corporate form, what makes a corporation different from other forms of business organization, and the problems of corporate reification. The concentration on reification is used as the introduction to the comparative analysis of American, European and Japanese approaches to the regulation of the corporation.
Chapter Four draws on the discussions in prior chapters, particularly in the last parts of Chapter Two, to consider the way in which conceptions of legal personality affect the form and substance of corporate regulation. The first part of the Chapter considers external regulation, and in particular the availability of constitutional or fundamental rights for corporations. The second part of the Chapter turns to the effect of different conceptions of legal personality on internal regulation of corporations. Chapter Four provides the basis for much of the discussion in the rest of the materials. Moreover, this chapter provides materials which illuminate the sharp differences possible among the various systems reviewed. Most importantly, it shows the way in which different views of corporate personality within a system can have a significant effect on the way in which corporations are regulated.
Chapters Five and Six introduce students to issues peculiar to corporate governance within multi-level federal or supra-national systems. As such, these chapters concentrate on the regulatory systems of the United States and the European Union. Japan and the PRC, as integrated unitary systems, do not encounter the formal problems of regulation considered in these chapters. Both chapters, however, point to patterns of regulation which might form a basis for worldwide harmonization in the future. Chapter Five concentrates on an area of fundamental difference between the corporate law of the United States and the European Community — how most efficiently to harmonize the corporate law of an integrated political union. In the United States such harmonization has occurred from the bottom up, by way of the so-called incorporation or “internal affairs” doctrine. Under this doctrine, the laws of the state of incorporation of a corporation determine its validity and the extent of the rights and obligations of the participants in the corporate enterprise. Once determined to be valid in the state of incorporation, such an enterprise must be recognized as valid and permitted to operate as such in all other states in the United States. In contrast, most European states have embraced the “siège social” doctrine, under which a corporation, to be validly established, must be registered in compliance with all of the company laws of the state in which its primary operations are located. The Chapters also introduce students to the means certain states, notably, California and New York, have sought, with limited success to import the concept of “siège social” into the American corporate jurisprudence, as well as the ways in which the European Court of Justice may be incorporating the English model of corporate organization into the Constitutional Law of the European Union.
Chapter Six continues the study of the problems of corporate governance in integrated federal unions by considering the potential for and effects of the federalization of corporate law in the United States and the European Union. The first part of the chapter considers arguments for the federalization of American corporate law. The latter part of the chapter is taken up with a consideration of the sources of Community law affecting company law. Particular focus is directed to the characteristics and effects of EC Council directives and regulations to harmonize corporate law within all of the Member States.
Chapters Seven through Eleven provide four distinct and separable areas of comparative study of corporate governance. Chapter Seven introduces the student to issues of liability for the pre-incorporation obligations of the enterprise established, and the liability of the corporation for ultra vires actions. The chapter considers the imposition of this liability under two circumstances — when the incorporators or promoters enter into agreement prior to the filing of the requisite documents which establish the existence, in law, of the corporation, and when people enter into contract or incur other obligations on behalf of an invalidly formed corporation. On the American side, the emphasis will be on general common law, with some consideration of the approach suggested under the Revised Model Business Corporation Act. On the European side, the chapter considers how the First and Second Council directives on company law harmonization treat these issues in the European Community. The nuance of Chinese and Japanese law round out the study.
Chapter Eight considers issues touching on state regulation of capital and capital requirements for companies. In the US, the emphasis will be on the approach taken by Delaware, a representative of the traditional approach to the maintenance of capital requirements. Consideration will also be given to the “modern” approach of the Revised Model Business Corporation Act, and the approach taken by California. Capital requirements form a far more important part of European and Japanese company law than it does in the US, and for reasons largely rejected as irrelevant in the US — the protection of creditors and other strangers to the corporate enterprise. The chapter examines the attempts to harmonize capital maintenance requirements set forth in the Second Company Law Directive. China’s distinctive approach is also considered.
Chapter Nine takes up a study of a core value of enterprise organization in corporate form – limited liability for investors. Much of the law in this area in the United States remains a matter of state common law. The same can, to some extent, be said of the law in the Member States of the EU. Japanese law provides a nice example of the way in which reception of foreign law that is not culturally compatible can be reworked to achieve a harmonious result. The Chinese approach to limited liability, based on the appointment of a natural person to stand in the place of the corporate legal person, is unique and ties the study of this area more closely to earlier considerations of the effect of conceptions of legal personality on corporate governance. The Chapter highlights the different approaches to the application of the doctrines of disregard of corporate personality in cases of multi-corporate enterprises, that is, of enterprises operating through a series of related corporations.
Chapters Ten and Eleven take up another core area of corporate governance – the supervision and disciplining of a corporation’s managers and dominant shareholders. Chapter Ten explores judicial and legislative approaches to the regulation of managers. It starts with a review of the American common law and statutory approaches to the regulation of the conduct of managers. It then contrasts these rules of fiduciary duty with the more formal, but also more narrowly tailored approaches in Europe. The European approach is contrasted with the Japanese hybrid of American and European approaches. Chinese construction of a system of monitoring managers will then be considered. The principal focus will be on what is known in the United States as the duties of care and loyalty.
Chapter Eleven considers the special case of shareholder discipline. It considers the circumstances under which shareholder discretion with respect to her holdings are properly the subject of regulation or control by the state. The American fiduciary duty approach, adopted by some, but by no means all, of the states, is contrasted with the approaches of continental Europe and Japan. Particular attention is paid to the problems of shareholder regulation in states where the state has or had a dominant position in the economy. In this connection, the case the focus is on Russia as a transitional economy and the People’s Republic of China as a state still wed to the concept of state ownership of the means of production.