The Structure of Corporation Law

Abstract

A corporation is a profit-seeking enterprise of persons and assets organized by rules.Most of these rules are determined by the unilateral action of corporate organs or officials.Some of these rules are determined by market forces.Some are determined by contract or other forms of agreement.Some are determined by law.This Article will consider the legal rules that directly concern the internal organization of the corporation and the conduct of corporate actors.'Viewed in terms of their form, these rules fall into three basic categories.Enabling rules give legal effect to rules that corporate actors adopt in a specified manner.Suppletory or default rules govern defined issues unless corporate actors adopt other rules in a specified manner.Mandatory rules govern defined issues in a manner that cannot be varied by corporate actors. 2 The major purpose of this Article is to develop the normative principles that determine which of the legal rules that concern the internal organization of the corporation and the conduct of corporate actors should be enabling or suppletory, and which should be mandatory.Because the corporation is an economic institution that is owned and managed by human actors, the development of these principles rests for the most part on economic analysis, quantitative data, and the insights of psychology.In practice, the application of these elements depends largely on the subject matter of the rule and the nature of the institutional setting.In terms of the nature of the institutional setting, I will distinguish between closely held corporations, publicly held corporations, and corpo-

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