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Traditional and Innovative Approaches to Legal Reform: The ‘New Company Law’

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Abstract

Lower barriers of entry for new firms and more flexibility in structuring a business organisation are the two key factors motivating the introduction of the new company law. In general, policymakers use new company law initiatives to encourage entrepreneur ship, innovation and cooperative arrangements. This paper distinguishes the diverse strands of company law reforms arising in the United States, Europe and Asia and points to the underlying conditions that shape the markedly different reform outputs. Our analysis points to three important factors — (1) private ordering; (2) fiscal transparency; and (3) limited liability — that influence the incentives for new firm creation. However, we find that many of the new company law reforms are incomplete. Nevertheless, these new company law reforms retain the ability to generate rents due to their adaptability and responsiveness to social and economic change.

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  94. The popularity of the Canadian Trust is evidenced by 255 trusts currently listed on the Toronto Stock Exchange. However, the income tax structure raised concerns for lawmakers faced with the imminent prospect of declining tax revenue. Recently, the Canadian Finance Minister responded by subjecting existing trusts to the same rate of taxation as corporations. The trusts will have a four-year transition period to adjust to the new regulations, see B. Simon, ‘Corporate Canada Takes a Deep Breath’, Financial Times, 5 November 2006.

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Authors and Affiliations

  1. Faculty of Economics and Econometrics, University of Amsterdam, Netherlands

    Joseph A. McCahery (Professor of Corporate Governance and Innovation, Professor of Financial Market Regulation)

  2. Tilburg Law and Economics Center, Netherlands

    Joseph A. McCahery (Professor of Corporate Governance and Innovation, Professor of Financial Market Regulation)

  3. ECGI, Brussels, Belgium

    Joseph A. McCahery (Professor of Corporate Governance and Innovation, Professor of Financial Market Regulation)

  4. Tilburg Law and Economics Center, Netherlands

    Erik P. M. Vermeiden (Professor of Financial Market Regulation, Professor of Law and Management, Senior Legal Counsel)

  5. Tilburg University Faculty of Law, Netherlands

    Erik P. M. Vermeiden (Professor of Financial Market Regulation, Professor of Law and Management, Senior Legal Counsel)

  6. Philips International B. V., USA

    Erik P. M. Vermeiden (Professor of Financial Market Regulation, Professor of Law and Management, Senior Legal Counsel)

  7. Economic Analysis Office, Economic and Industry Policy Bureau, METI, USA

    Masato Hisatake (Director, Consulting Fellow)

  8. Research Institute of Economy, Trade and Industry (RIETI), Japan

    Masato Hisatake (Director, Consulting Fellow)

  9. Corporate Technology Management, Nikon Corporation, Japan

    Jun Saito (Executive Staff)

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  2. Erik P. M. Vermeiden
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  3. Masato Hisatake
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  4. Jun Saito
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McCahery, J.A., Vermeiden, E.P.M., Hisatake, M. et al. Traditional and Innovative Approaches to Legal Reform: The ‘New Company Law’. Eur Bus Org Law Rev 8, 7–57 (2007). https://doi.org/10.1017/S1566752907000079

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