The Role of Solicitors in Regulating and Constraining Directors in the Nineteenth Century Anglo-American World
Following the 2008 financial crisis, mechanisms for regulating corporate governance and control have become an increasingly contentious topic within private law. In Britain, the Companies Act 2006 s 171-7 provides a thorough and detailed explanation of what directors should be expected to do, their powers and how they should behave. This Act constituted a novel attempt to codify the rules surrounding directors’ duties and a move towards a European style of law making. Prior to this enactment, a director’s power and responsibilities were defined by common law and most significantly in the case of Foss v Harbottle in 1843. It established that shareholders and directors alike were bound by the rules and regulations set out in the company’s articles of association – that is in a contract between its shareholders. These rules and regulations defined the Board of Directors and management of the organisation.
This project aims to explain the transfer to the United States of the legal rules, principles and ideas which regulated directors and managers, and the ways in which British solicitors exported their understanding of the corporate form. It asks, when drawing the company’s articles of association, what situations were these solicitors attempting to prevent from occurring? Did the United States follow the rules and principles established in British contract law to constrain and control directors or did they create new ones? Or did divergence create a more stable system? The principal concern is to examine how, or how not, there were transfers of law and legal best practice across the Atlantic.
This legal history project therefore proposes an important and timely contribution to the current debate about the nature of the corporation and the ways in which it has been understood within the Anglo-American world. Historical study is critical here because it informs the present debate; it explains how the corporation as a legal and social construct has been created, and the ways different actors and legal systems have sought to restrain and control corporate power. Comparative historical research plays an equally important role with regard to these topics because it can show a different set of legal ideas and paths not taken, and the impact of that regime on corporate stability.