International Corporate Law Assignment Sample
Question 1
“The purpose of the corporation is to maximize shareholder wealth”
1. Introduction
Shareholder wealth is one of the common aspects of the company that needs to be maximized as much as possible. It is the superior goal of the company to increase the shareholder’s wealth in order to maintain its sustainability in the global market. This study emphasizes the overall concept of this purpose of the company in the light of corporate laws. The study enlightens the same with relation to the laws of Germany, the US, and the UK, and compares the corporate laws within this jurisdiction. Therefore, it is to state that this study highlights the importance of the shareholder’s wealth in a company in accordance with the legal rules of the company in the respective jurisdiction.
2. Critical evaluation and comparison of legal rules
The question enumerates that the company aims to increase shareholders’ wealth and thus the purpose of the company remains with the shareholders’ interest. The context is described in a manner as to maintain the wealth of the company by following the corporate legal system in the country. However, it is pertinent to mention in this context that the world divides the legal system into two divisions such as Common law system and Civil laws. It can be observed that 150 nations in the world follow the civil law system and almost 80 nations follow a common law system in the world[1]. However, it can be seen that there are some distinctions in the corporate laws of the countries of both the legal systems but most of the countries combined the rules of both systems and formed a new legal jurisdiction.
The main distinction of these legal systems is that in the common law system, the case law in the countries is the way to publish the court opinions. Whereas, codified legislation prevails in the countries that follow the civil law systems. It is to mention that these systems prevail in most of the countries and codified legislations are the most valid ones[2]. The statutes of the countries maintain the equilibrium of the country and corporate laws are defined in these countries. However, the UK and US follow the common law system but Germany follows the civil law system. The UK and US do not have the written form of the jurisdiction in most cases. The nation runs the jurisdiction in a manner as to follow the previous case laws.
Civil Law
A written constitution based on specific codes is enumerated in those countries that follow civil law systems. These countries aim at improving their legal systems by amending specific provisions incorporated in the statutes. There are several statutes enumerated in these countries such as Constitutional law, Tax law, Administrative law, Corporate Law, and Civil code. The laws are written and the countries follow the statutes at the proceedings[3]. These laws enshrined the basic legal duties and rights of the population of these countries. Germany follows the civil law system in the proceedings as the laws are codified in the respected country.
Germany follows the Basic Law that is referred to by the federal constitution of the country. This enumerates the overall concepts of the laws enumerated in the system of proceedings. The laws in Germany are codified and drafted and maintain the equilibrium of the legal system in a prescribed manner. The federal states of the country also codify the laws in a way to maintain the legal system on the right path and thus the laws are codified in the federal states as well. However, the codified laws enumerated in the states are of secondary importance as federal laws of the country supersede the laws that are enumerated in the state laws.
The Common Law
The common law system of a country indicates the system that is governed by the previous case laws of the state. The laws that are precedent in the case laws of the previous cases are enumerated in the latter cases. This system has been enumerated by the Equity courts in the early times of the jurisdiction[4]. The courts used to enumerate the laws and incorporate the same by the way to maintain their strengths in the long run. These laws are recently founded in the statutory laws as well as the legal precedents. The legal precedents of the country are enumerated by the judges of the administrative courts who follow the rules that are not codified in any statutes. These precedents become laws for the country and it is used by the judges in the latter cases.
“American Legal System” follows the common law system and thus it is evident that the country is directed by the precedents that are prescribed by the judges of the courts. Formal adjudications that are enumerated in the system are followed by the precedents and the legal system in the US depends on those precedents to a large extent[5]. The legal system of the US refers to the previous court cases even when the statutes are in question by the cases in the procedures.
In the UK, common law is preferred as the country depends on the basic rights of the system. The matters that come forward in the courts are to be heard by the judges and it entirely depends on the previous case laws enumerated in any court in the earlier cases[6]. The laws that are made by the judges are also enumerated in the proceedings and are followed by the court in the latter cases. King Henry II is the founder of this system in the UK’s legal system as at that time several customary laws were being replaced with new rules. These rules were applicable to all the citizens and thus it is named “Common Law”.
3. Ethical, political, economic, and theoretical concepts
Ethical Concept
The concept of running a business is the ethical aspect of corporate governance and this allows the company to maintain the equilibrium in the global market. However, it is to note that the ethics to maintain the corporate governance in a company is to be evaluated in a manner as to maintain the equilibrium of the company[7]. The management and employees must maintain certain behaviours in the company that are incorporated in the guidelines of the company. Every action and behaviour is broadly maintained by the company in an ethical way. The way of controlling and directing the employees by the management is also to be taken care of by the company in a different way. The board of the company depends on the behaviours and thus creates some of the issues caused by them. The issues may be transparency, interest conflicts, stakeholder accountability, remuneration and diversity. These issues may be taken into consideration by the management in the boardroom and then discussion of the same to resolve the issues are to be enumerated as per the corporate laws of the company.
Political Concept
Corporate laws are the trends that help a company in increasing the economies of the company by the influence of shareholders in the company. However, corporate laws are equally influenced as the other laws in the world with relation to the political factors. Political actors such as interest parties, bureaucrats and politicians are the actors who formed these laws in order to keep the rules that favoured their interest politically. In order to form their constituency, the rules are made by them to influence the company’s growth. The companies follow those rules in order to maintain the growth and allow political leaders to influence the company and the stakeholders[8]. In recent days, the political actors have taken a step forward to change this system in the long run and maintain the rules to evaluate the same. However, the company’s growth must be maintained by the management of the company but it is influenced by the political actors to a large extent. The changes by the political actors are to be maintained in a way to make the rules of corporate laws to become sophisticated in accordance with the perspectives of the factors that are politically influenced.
Economic concept
Economic concept of corporate law indicates the study of microeconomics in the way to maintain the equilibrium of the finance department of the company. This allows the company to evaluate the economic growth of the company. The economic analysis of the corporate laws applies in the concept of the company that regulates the changes in the long run[9]. The legal practices, regulations and rules are enumerated in the corporate laws so that the economy of the company increases. The increase in the economy highlights the growth and governs the operations and formation of the business corporations. This maintains the growth of the economies in the company and helps the company to maintain the finance department. The duties and rights of the creditors, shareholders, officers and directors are enumerated in the corporate laws of the particular company. The corporate law of the company in order to increase the growth of the economies focuses on the limitation of the liability.
Theoretical concept
The concept includes the theories of corporate laws “Legal Theory of Corporations”, “Ontology of Corporations” and “Vagueness, Artifice and Reality”. “Legal Theory of Corporations” is the set of theories that incorporates the legal theories in a way to maintain the equilibrium of the company[10]. There are several theories incorporated in the set of theories that can be described as below:
The Concession Theory
Corporation is usually termed as the office or firms that are intangible, invisible, and artificial and exists only under the contemplation of law. This statement was introduced by Chief J. John Marshall in 1819 that became the most effective statement for the time being. The theory states that the corporations are derived by the state in relation with the contemplation of the same.
The aggregate Theory
The aggregate theory was introduced by some theorists that started to maintain their equilibrium by introducing some of the managing principles in place. At that time some corporations were deemed to start the partnership analogies in the commencement of the office. The company may also include the same category of the term that derives from those purposes.
Based on the above discussion, different aspects of the corporate law have been defined in a manner as to maintain the equilibrium of the company. In order to increase the economic growth of the company, the organization must take these aspects of corporation law in mind.
4. Independent research findings
International corporate law indicates the field of law that helps a company in deriving the aspects of maintaining the equilibrium to expand business. The expansion of the business in the growth of the superior power of the company may be incorporated in the study. However, it is to argue that the shareholders’ policy to increase the economic growth of the company is fragmented in some of the cases. International corporate law helps the company to maintain its growth by the expansion of the business in a way to maintain the business in other countries as well[11]. When the company intends to expand its business to other countries, the international corporate laws take its place. The economic growth of the company may be introduced if the corporate laws are implemented in a proper way in the company rules.
International corporate law helps the companies to deal with the functions of the other country by regulating the laws or rules of that particular country. The corporate laws in the UK depend on certain facilities that are incorporated under the Companies Act of 2006. However, it is argued that the laws incorporated in the Companies Act are the rules and regulations to be followed by the companies in order to maintain the equilibrium in the offices under certain circumstances[12]. Statutes are introduced only for the corporate laws in the nation that creates a fuss in the institute of the proceedings. Mostly the suits that are introduced in accordance with the corporate laws are to be maintained by the arbitrators.
Arbitrators are the legal bodies that take the place of the jury in some types of proceedings that are incorporated in relation with the corporate laws. Sections 380 to 474 of the Companies Act 2006 deals with certain regulations that help the organizations to maintain an equilibrium of work behaviour. The argument follows that in absence of written regulations specified in any statutes, the maintenance of the proceedings may get disturbed[13]. However, the provisions mentioned in the Companies Act may be followed in accordance with certain facilities that set out the requirements of the statutes. The filing of reports and accounts, distribution and preparation of the same are also included in those sections. Moreover, these provisions help the companies to deal with certain facilities that may indulge the parties in the proceeding in a significant way.
In the US, the corporate laws were introduced by the US Constitution and the same was interpreted by the US Supreme Court. The interpretation helps the companies to maintain and construct the business or office in a manner as to deal with major functions incorporated in the proceedings. The US Supreme Court confirms the companies to be incorporated in the states where they want to build the offices. The choice to construct the same depends on the company’s intention and thus the companies are interpreted in a way to maintain the belongings[14]. The headquarters of the companies may be situated anywhere in the nation but they will have a right to construct the same in any of the states within the nation. It is argued that the constitution has been interpreted by the Supreme Court where it is not mentioned that any written statute may be incorporated in accordance with the corporate laws of the country. However, it is to note that the corporate laws prescribed under the Constitution states that it may deal with the power, finance and governance of the companies.
In Germany, the corporate laws are well defined as the legal regime of the country. It deals with certain facilities that may be organized in a manner as to support the offices in a particular manner. The corporate in the nation help the local regime to be maintained in the way to maintain the equilibrium of the company. The country’s corporate laws are broadly defined in the entities’ organized regulations. The companies in the nation follow all the directories that may be included in a manner to prescribe all the laws and regulations of the company. The legal framework and guidelines are incorporated in the entities of the company that must be followed by the management in a way to maintain the equilibrium of the company[15]. However, it is also to note that the entities must be recognised by the German government in order to keep the track of the company’s real operations. It has been argued that the defined corporate laws are incorporated in a manner to find the possibilities of the company as well to maintain the staff but it is not recognised by the companies to deal with the same. The stock corporations of the company deal with certain manners to maintain the equilibrium of the company by introducing a two-tier structure of the board.
5. Strategic skills of international corporate law
It has become a substantial ongoing debate, as far as the academic studies have concerned, that the main objective of an organisational business is to increase the shareholder’s wealth. Based on this argumentative fact, most scholars have agreed that in the United Kingdom and the United States the “shareholder value theory” has been considered as the most dominant one[16]. A much greater emphasis has been provided by directors of the UK and US on the shareholder value. In fact, in the present days, it has been generally proclaimed that the majority of the organisations of the United Kingdom have started following the shareholder value approach. Inline, this particular approach has been adopted by the countries of the United States as well in this present situation.
In accordance with the above-mentioned discussion, for instance, it can be stated that the countries like “Australia”, “Canada”, “New Zealand” have practised corporate laws within organizations with the main intention of increasing the wealth of the shareholders. In the Companies Act 2006, s.10, it has been encrypted that the statement of capital and initial shareholdings must state ” the amount to be paid up and the amount (if any) to be unpaid on each share (whether on account of the nominal value of the share or by way of premium)”[17]. This particular law has been made in order to secure the shareholders’ value in the corporate sectors. Plenty of studies have stated, “The UK is a liberal market economy that has features, such as a dispersed share ownership, more susceptibility to hostile takeovers and the existence of large institutional investors which are eager for quarterly improvements in the share price, and this tends to entrench shareholder value”[18]. This particular statement has been supported by an occasional comment of “UK chairman of NTL” who said in a conference in 2006, “we always look to maximise shareholder value”.
In order to support this statement “former CEO and chairman of Lloyds TSB plc” has stated, “shareholder returns is the critical issue in corporate management”. Therefore, based on the above discussion it can be stated that in the countries of the United States and the United Kingdom, shareholders value theory has been practised and in order to make the practice a better way, the Companies Act of both the states encrypted different laws as well[19]. Therefore, it can be stated that, not only in the United Kingdom but also in the United States of America, the practice of securing shareholders’ wealth has been considered as one of the most dominant factions of the professionals of the corporate companies[20]. In the Companies Act 2006 of the UK, from s.369 to s.373, different regulatory procedures have been encrypted regarding the shareholders’ actions[21]. On the other hand, nothing specified regarding the role and responsibilities of the shareholders have been included in the German corporate law until the 1965 revision of the corporate law[22]. In the initial stage of the formation of corporate law of Germany, it has been stated, “The managing board is, on its responsibility, to manage the corporation for the good of the enterprise and its retinue (Gefolgschaft), the commonweal of the folk (Volk) and the state (Reich)”[23]. In addition” despite the relatively recent recognition that shareholders represent an important constituency (see discussion in the next Section), corporate law in Germany has historically made it clear that shareholders are only one of the many stakeholders on whose behalf the managers must manage the firm”. The structure of the equity ownership” in Germany differs quite substantially from that observed in the US”[24]. On the basis of the evaluated facts by different studies it can be stated that “Less than 17% of the equity was owned by households (as compared to approximately 50% in the US), a proportion that has steadily declined since the 1950s”[25]. Therefore, this regulatory action of the German government has proven that the practice of shareholder value has not been prioritized in the corporate sectors of Germany.
Based on the discussion represented in the above section, it can be stated that the countries of the United Kingdom and the United States of America support the shareholders’ value theory and practice this in the corporate segments as well. On the contrary, the corporate laws of Germany neither support the shareholders’ value nor permit the practice of this theory within the corporate action[26]. In accordance with the corporate law of Germany, the shareholders can be considered as one of the stakeholders of the organisation under whom the managers need to proceed and practice their corporate responsibilities[27]. Therefore, the above discussion has helped in the evaluation of this conclusion that in different countries of the UK and the US, the government bodies support the practice of shareholder value theory. However, in comparison, Germany counts shareholders among the other important stakeholders for the business and in Germany, the shareholders do not provide important to the securing increment of the shareholder’s wealth.
6. Conclusion
Based on the above discussion, it can be stated that in different states the practice of shareholders’ value theory has been done in different manners. On the other hand, in the states such as Germany, the government or the corporate laws do not allow giving any extra importance to the main objective of the organisational business that is to maximise shareholders wealth. The above discussion section has included effective and critical discussion regarding the statement “The purpose of the corporation is to maximise shareholder wealth”. Based on the corporate laws of the UK, US and Germany, an argumentative and critical discussion has been represented in this study. In addition, the discussion has been supported in an efficient manner by deriving different information and examples that help to establish the corporate laws in the US, UK and Germany, as per the requirement of this study. In addition, in the present study ethical, political and economic concepts of the above-mentioned states and their corporate laws have been discussed as well.
Bibliography
Statutes
Companies Act 2006
Books
Bussmann, Kai-D., Sebastian Oelrich, Andreas Schroth, and Nicole Selzer. The Impact of Corporate Culture and CMS: A Cross-cultural Analysis on Internal and External Preventive Effects on Corruption. (Springer, 2021)
O’Malley, Patrick J. Directors’ Duties and Corporate Anti-Corruption Compliance: The’Good Steward’in US and UK Law and Practice (Edward Elgar Publishing, 2021)
Newspaper article
Simon Jack, “New UK laws to sweep away EU state aid rules” BBC News (London, 30 June 2021)
Journal articles
Amor-Esteban, Víctor, Isabel-MaríaGarcía-Sánchez, and Mª-Purificación Galindo-Villardón.”Analysing the effect of legal system on corporate social responsibility (CSR) at the country level, from a multivariate perspective.”[2018] SIR 435-452.
Anderson, Siwan. “Legal origins and female HIV.” [2018] AER 1407-39.
Baker, John “Criminal courts and procedure at common law 1550–1800.” [2020] CIE 1550–1800. 15-48.
Balmaceda, Jorge “The Harmonisation of the International Sale of Goods Through Principles of Law and Uniform Rules”. [2020] CSP
Bansal, Shashank, Maria Victoria Lopez-Perez, and Lazaro Rodriguez-Ariza. “Board independence and corporate social responsibility disclosure: The mediating role of the presence of family ownership.” [2018] AS 33.
Chapman, Alison, “Preface: Making Sense of Many Laws Courts, Jurisdictions, and Law in John Milton and His Contemporaries” [2020] UCP xiii-xvi.
Coggiola, Nadia “The Influence of Foreign Legal Models on the Development of Italian Civil Liability Rules from the 1865 Civil Code to the Present Day.” [2019] IL 441.
Cornell, Bradford, and Alan C. Shapiro. “Corporate stakeholders, corporate valuation and ESG” (2021) EFM 27, 196-207
Dugar, Gregor. “Intergenerational Transfer of Family-Run Enterprises in Slovenia in Comparison with German Law” (2021) CEJCL 2, 27-37
Epstein, Richard “A Common Law for the First Amendment.” [2018] HJP 41
Fleischer, Holger. “Corporate Purpose: A Management Concept and its Implications for Company Law” (2021) ECFLR 18, 161-189
Islam, Mohammad Sohidul. “Examining Bangladesh’s legal responses to the emerging law and policy issues: Successes, limitations and future directions.” [2021] AJAL 1-6.
Jackson, John “Common Law Evidence and the Common Law of Human Rights: Towards a Harmonic Convergence.” [2018] WMBR 689.
Palladino, Lenore. “Financialization at work: Shareholder primacy and stagnant wages in the United States” (2021) CC 25, 382-400
Parry, Rebecca. “An assessment of UK insolvency laws in the light of new ways of working in the era of Covid-19” (2021) ICR 18, 2
Patriotta, Gerardo. “The Future of the Corporation” (2021) JMS 58, 879-886.
Websites
Law.ox.ac.uk, ‘Politics of Corporate Governance’, (Law.ox.ac.uk, 2018) < https://www.law.ox.ac.uk/business-law-blog/blog/2019/07/politics-corporate-governance> accessed 14th January 2022
Legislation.gov.uk, ‘Companies Act 2006’ (2022) <https://www.legislation.gov.uk/ukpga/2006/46/pdfs/ukpga_20060046_en.pdf> Accessed 14th January 2022]
Mindleap.co.uk, ‘A Review of the Ethical Aspects of Corporate Governance Regulation and Guidance in the EU’, (Mindleap.co.uk, 2020) <https://mindleap.co.uk/downloads/areviewoftheethicalaspectsofcorporategovernanceregulationandguidanceintheeujune2013.pdf> accessed 14th January 2022
Miscellaneous
Roberts, Ken. “Generation equity and inequity: gilded and jilted generations in Britain since 1945” (2021) JYS 24, 267-284
Scalia, Antonin, “Common-law courts in a civil-law system: the role of united states federal courts in interpreting the constitution and laws”. [2018] PUP
Simeon, James “The evolving Common Law jurisprudence combatting the threat of terrorism in the United Kingdom, United States, and Canada.” [2019]: L8.1 5.
Sulimany, Hamid Ghazi, Suresh Ramakrishnan, Asim Chaudhry, and Ayman Hassan Bazhair. “Impact of Corporate Governance and Financial Sustainability on Shareholder Value” (2021) SAE 39, 4
[1] Scalia, Antonin, “Common-law courts in a civil-law system: the role of united states federal courts in interpreting the constitution and laws”. [2018] PUP
[2] Chapman, Alison, “Preface: Making Sense of Many Laws Courts, Jurisdictions, and Law in John Milton and His Contemporaries” [2020] UCP xiii-xvi.
[3] Baker, John “Criminal courts and procedure at common law 1550–1800.” [2020] CIE 1550–1800. 15-48
[4] Jackson, John “Common Law Evidence and the Common Law of Human Rights: Towards a Harmonic Convergence.” [2018] WMBR 689.
[5] Simeon, James “The evolving Common Law jurisprudence combatting the threat of terrorism in the United Kingdom, United States, and Canada.” [2019]: L8.1 5.
[6] Islam, Mohammad Sohidul. “Examining Bangladesh’s legal responses to the emerging law and policy issues: Successes, limitations and future directions.” [2021] AJAL 1-6.
[7] Mindleap.co.uk, ‘A Review of the Ethical Aspects of Corporate Governance Regulation and Guidance in the EU’, (Mindleap.co.uk, 2020) <https://mindleap.co.uk/downloads/areviewoftheethicalaspectsofcorporategovernanceregulationandguidanceintheeujune2013.pdf> accessed 14th January 2022
[8] Law.ox.ac.uk, ‘Politics of Corporate Governance’, (Law.ox.ac.uk, 2018) < https://www.law.ox.ac.uk/business-law-blog/blog/2019/07/politics-corporate-governance> accessed 14th January 2022
[9] Anderson, Siwan. “Legal origins and female HIV.” [2018] AER 1407-39.
[10] Epstein, Richard “A Common Law for the First Amendment.” [2018] HJP 41
[11]Coggiola, Nadia “The Influence of Foreign Legal Models on the Development of Italian Civil Liability Rules from the 1865 Civil Code to the Present Day.” [2019] IL 441.
[12]Balmaceda, Jorge “The Harmonisation of the International Sale of Goods Through Principles of Law and Uniform Rules”. [2020] CSP
[13] Amor-Esteban, Víctor, Isabel-MaríaGarcía-Sánchez, and Mª-Purificación Galindo-Villardón. “Analysing the effect of legal system on corporate social responsibility (CSR) at the country level, from a multivariate perspective.” [2018] SIR 435-452.
[14] Bansal, Shashank, Maria Victoria Lopez-Perez, and Lazaro Rodriguez-Ariza. “Board independence and corporate social responsibility disclosure: The mediating role of the presence of family ownership.” [2018] AS 33.
[15] Scalia, Antonin, “Common-law courts in a civil-law system: the role of united states federal courts in interpreting the constitution and laws”. [2018] PUP
[16] Parry, Rebecca. “An assessment of UK insolvency laws in the light of new ways of working in the era of Covid-19.” (2021) ICR 18, 2
[17]Legislation.gov.uk, ‘Companies Act 2006’ (2022) <https://www.legislation.gov.uk/ukpga/2006/46/pdfs/ukpga_20060046_en.pdf> Accessed 14th January 2022]
[18]Patriotta, Gerardo. “The Future of the Corporation” (2021) JMS 58, 879-886.
[19] Cornell, Bradford, and Alan C. Shapiro. “Corporate stakeholders, corporate valuation and ESG” (2021) EFM 27, 196-207.
[20] Simon Jack, “New UK laws to sweep away EU state aid rules” BBC News (London, 30 June 2021)
[21] Bussmann, Kai-D., Sebastian Oelrich, Andreas Schroth, and Nicole Selzer. The Impact of Corporate Culture and CMS: A Cross-cultural Analysis on Internal and External Preventive Effects on Corruption. (Springer, 2021)
[22] Fleischer, Holger. “Corporate Purpose: A Management Concept and its Implications for Company Law” (2021) ECFLR 18, 161-189.
[23]Dugar, Gregor. “Intergenerational Transfer of Family-Run Enterprises in Slovenia in Comparison with German Law” (2021) CEJCL 2, 27-37.
[24] O’Malley, Patrick J. Directors’ Duties and Corporate Anti-Corruption Compliance: The’Good Steward’in US and UK Law and Practice (Edward Elgar Publishing, 2021)
[25] Roberts, Ken. “Generation equity and inequity: gilded and jilted generations in Britain since 1945” (2021) JYS 24, 267-284.
[26]Sulimany, Hamid Ghazi, Suresh Ramakrishnan, Asim Chaudhry, and Ayman Hassan Bazhair. “Impact of Corporate Governance and Financial Sustainability on Shareholder Value” (2021) SAE 39, 4
[27]Palladino, Lenore. “Financialization at work: Shareholder primacy and stagnant wages in the United States” (2021) CC 25, 382-400
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