EO
I) Introduction
A) Historical insights from The Company:
1) Extra kick from people coming together
2) History of conferring a legal personality on the thing
(a) Interesting, but is it determinative of success? We still have partnerships, for example, that have no separate legal identity.
3) Agency problem – can the principles control the agents? How far can the agents act on behalf of their principles?
4) Absence or appearance of some kind of written K – there are identifies that don’t use a written K:
(a) Family partnerships/workshops
(b) Trading partnerships – often oral Ks
(c) Distinguish btwn world w/ a K & a statute
5) Diversification of risk – diversification of areas AND of projects – used to run one project
6) Role of globalization
7) Limited liability –
(a) there’s something very important to granting limited liability to SHs
(b) perhaps cognizant of the poor public relations side to limited liability – can be perceived as lack of confidence
8) Companies have infinite life/continuing eternally – beyond death/selling of members/investors
9) Relation to capital markets – didcompanies give rise to the capital markets or vice versa?
10) Altruistic/social concerns of company – at odds w/capital mkt but good socially? “social responsibility” statements from companies
B) State corporations start doing 3 things that are “setting the company free” in U.S.
1) Period = Napoleonic Wars
2) Overwhelming need for capital
(a) RRs
(b) Something about coming together & forming business association to aggregate capital
3) Dartmouth College case
(a) First time that SCOTUS really looked at corporations as legal entities
(b) Said they had sa
e to each other in terms of selling their equity/ownership interests
(iv)Whole bunch of relationships between these different owners that we’re going to be concerned about
(f) That’s what this class is: the moment you transition from sole proprietorship and to creating your own business association and the questions in governing those relationships
2) The role of lawyers
(a) Look at the situation from the front end: how do you address threats/risks/costs?
(i) Opportunistic behavior is one of the transaction costs that lawyers can engineer going in
(ii) Strategies:
· Ex-ante = private – K-ing beforehand
· Ex-post = judicial ordering by a court after problem arises
