On the Evolution of Corporate Forms

The major theme underlying this symposium is the development and growth of many new forms of business associations over the last few dec-ades. These new forms are characterized by a combination of personal freedom from partner/owner liability and far-reaching freedom of con-tract for partner/owners. The question thus becomes whether this devel-opment of new business associations amounts to an extension of limited liability to partnerships or an extension of freedom of contract to corpo-rations. Leading scholars Henry Hansmann, Reinier Kraakman, and Richard Squire have posited that the latter theory prevails. Specifically, these scholars discuss the concepts of “entity shielding”—i.e., how, and to what extent, a firm’s assets may be separated, or be kept separate, from the partners/owners’ creditors—and “owner shielding”—i.e., how, and to what extent, a partner/owner’s assets may be separated, or be kept separate, from the firm’s creditors. According to Hansmann et al., entity shielding is logically prior to owner shielding; thus, new forms of busi-ness associations have developed through an extension of freedom of con-tract to corporations. Hansmann et al. believe that this understanding of the evolution of business associations possesses predictive value for future developments in business association law.Professor Samuelsson refers to Hansmann et al.’s entity-shielding-prior-to-owner-shielding theory as the “priority thesis” and claims that it is an empirical rather than logical statement. To test that thesis, he traces the legal development of business associations in Europe and Sweden and concludes that those histories do not support Hansmann et al.’s priority thesis and that there are no regularities in the historical evolution of as-sociation law that provide predictive value for the future of association law.

The full text of this Symposium is available to download as a PDF.