An Interdisciplinary and Comparative Examination
- Corporations, Globalisation and the Law series
Chapter 3: The Legal Structure of Multinational Enterprises
Introduction Historically, both in civil and common law systems, company laws are based on the concept of separate legal personality. It is assumed that a company is a distinct economic unit, which enjoys economic and managerial independence, and therefore must be considered as a legal person separate from its members. Legal personality gives great flexibility to an organization in structuring its affairs and facilitates creative exploitation of property rights. It also gives representative rights; they can sue and be sued, represent themselves in a court and can undertake obligations independent from its shareholders. Consequently the English, American and even new emerging European Community company laws are still based on theory of the independence of companies. The independence theory covers all companies, including single-member companies and wholly owned subsidiaries of MNEs. On the other hand, companies are creatures of national legal systems since they are incorporated in certain jurisdictions. They are tied to definite nationalities from different perspectives as well.1 However, in transnational economic activities, a single and independent national company exists only in theory. Since the emergence of modern company laws in the second half of 19th century, there have been speeches, teachings, litigation and legislation about company law but the primary reality today is not only the company, it is also company groups that have dominated the business world.2 Even small-scale economic activities might be structured to operate their business under a corporate group structure. The domination of corporate groups can apparently be seen in the case of crossborder...
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