The Rise of the Uncorporation

by Ribstein, Larry E.

• ISBN13: 9780195377095
• ISBN10: 0195377095
• Format: Hardcover
• Copyright: 2009-12-01
• Publisher: Oxford University Press

Summary

The Rise of the Uncorporation covers the history, law, and finance of unincorporated firms. These "uncorporations" including general and limited partnerships and limited liability companies, are now the dominant business form of non-publicly-traded firms. Through private equity and publicly traded partnerships, uncorporations have emerged as a significant force in the governance of a wide range of the biggest firms. This is the first general theoretical and practical overview of alternatives to incorporation, including ancillary concepts connected with the evolution of these firms, and analysis of likely future trends in business organization. The Rise of the Uncorporation provides a clear and easily understandable theoretical and practical background to this important subject.

Table of Contents

Acknowledgments	p. xv
Introduction	p. 1
Why Study Uncorporations?	p. 1
The Uncorporate Solution to Governance Problems	p. 1
The Uncorporation and Contracts	p. 2
The Uncorporation Today	p. 2
Uncorporations in the Economy	p. 2
Do Business Associations Matter?	p. 3
Theories of the Uncorporation	p. 4
Structure	p. 4
Contracts	p. 6
Flexibility	p. 7
Competition and Business Forms	p. 9
The United States and Around the World	p. 9
The Plot of the Book	p. 10
Theoretical Considerations	p. 15
Why Firms?	p. 15
Governing Firms	p. 17
Specialization of Management and Ownership	p. 18
Managers and Agency Costs	p. 18
Owners and Opportunism	p. 19
Owners vs. Creditors	p. 20
Firms and Non-firms	p. 20
Governance and Underlying Business Conditions	p. 21
Why Business Associations?	p. 21
Formation	p. 22
Property Ownership	p. 22
Firm's Relationships with Creditors	p. 22
Management and Control	p. 23
Financial Rights	p. 23
Transferability	p. 23
Fiduciary Duties and Remedies	p. 23
Exit	p. 24
The Role of Standard Forms	p. 24
Why Business Association Law	p. 25
Why Different Business Associations?	p. 26
The Architecture of Business Association Statutes	p. 28
Short All-purpose Statute	p. 29
Chinese Menu Approach	p. 29
Hub-and-Spokes	p. 30
Flexibility	p. 31
The Evolution of Business Associations	p. 31
Choice and Design of Contracts	p. 31
Government Constraints: Regulation and Tax	p. 32
Jurisdictional Competition and the Common Law	p. 34
Background Factors: Business Environment, Technology, arid Culture	p. 35
The Corporation and Incorporation	p. 36
History and the Regulation of Governance	p. 36
Type of Contracts	p. 37
Type of Governance	p. 38
Partnership	p. 39
Early History	p. 40
The Nature of Partnership: Entity or Aggregate?	p. 41
Vicarious Liability	p. 43
Owners' Financial Rights	p. 44
Management	p. 46
Fiduciary Duties and Remedies	p. 48
Transferring Rights	p. 51
Exit	p. S3
Formation	p. 55
Limited Partnerships	p. 60
Joint Stock Companies and Limited Partnership Associations	p. 62
The Rise of the Corporation	p. 65
Corporate Features and Large Firms	p. 67
Centralized Management and Corporate Boards	p. 67
Fiduciary Duties and Remedies	p. 68
Owner Voting	p. 69
Capital Lock-in	p. 71
Limited Liability	p. 72
Transferable Shares	p. 72
Entities and Aggregates	p. 73
Could Partnerships Have Adopted Corporate Features?	p. 76
Capital-lock-in: In General	p. 76
Entity Shielding	p. 77
Partnership Break-up	p. 77
Centralized Management	p. 78
Transferability	p. 79
Limited Liability	p. 79
Limited Liability without Incorporation	p. 80
Non-recourse Contracts	p. 81
Unintentional Partnerships	p. 81
Undisclosed Principals	p. 81
Promoter Liability	p. 82
Corporation by Estoppel	p. 83
Limited Tort Liability	p. 84
Formal Noncorporate Limited Liability Firms	p. 84
The Corporation and the Regulation of Governance	p. 85
Why Regulate Corporate Governance?	p. 86
How Do Lawmakers Regulate Governance?	p. 87
International Comparisons	p. 90
The United Kingdom	p. 90
European and Latin American Developments	p. 93
The Problems of the Close Corporation	p. 95
Limited Liability and the Closely Held Firm	p. 96
Lock-in	p. 97
Other Corporate Rules	p. 98
The Corporate Tax: The Price of limited Liability	p. 99
Other Roadblocks to Partnerships with Limited Liability	p. 101
The Close Corporation as Evolutionary Dead End	p. 102
Denial	p. 103
Judicial Acceptance	p. 104
Director Control Agreements	p. 106
Shareholder Voting Arrangements	p. 106
Share Transfer Restrictions	p. 107
Breakdown and Exit	p. 108
Tax Accommodation of the Closely Held Corporation	p. 112
Full Statutory Authorization of Close Corporations	p. 113
Failure	p. 116
The Evolution of the Modern Uncorporation	p. 119
The LLC Revolution	p. 119
The Uncorporation Develops	p. 123
The Importance of Non-Organization Law	p. 124
The Rest of the Uncorporation Menagerie	p. 125
General Partnership	p. 126
LLP	p. 127
Limited Partnership	p. 128
LLLP	p. 130
The Evolving LLC	p. 131
European Developments	p. 133
The Modern Uncorporation	p. 137
Member Shielding: Limited Liability	p. 138
Corporate Limited liability	p. 139
The Evolution of Uncorporate Limited Liability	p. 139
General Partnership: Entity Aspects of Unlimited Liability	p. 140
Limited Liability Partnership	p. 142
Limited Partnership	p. 143
Limited Liability Company	p. 143
Management	p. 147
Corporation: Standardized Hierarchy	p. 149
General Partnership: Direct Member Management	p. 150
Limited Liability Partnerships	p. 151
Limited Partnership: Uncorporate Centralized Management	p. 152
Limited Liability Company: Chameleon Approach	p. 153
Members' Financial Rights	p. 156
Non-economic Members	p. 156
One-owner Firms	p. 158
No-owner and Nonprofit Firms	p. 160
Contributions	p. 161
Profits, Losses, and Distributions	p. 163
Fiduciary Duties: General Principles	p. 165
Fiduciaries vs. Non-fiduciaries	p. 166
Due Care	p. 166
Misappropriation	p. 167
Business Opportunities	p. 167
Good Faith	p. 167
Opt-out	p. 168
Remedy	p. 168
Fiduciary Duties in Specific Business Associations	p. 169
Corporation	p. 169
General Partnership	p. 171
Limited Partnership	p. 174
Limited Liability Company	p. 177
Dissociation and Dissolution	p. 179
Transferring Interests	p. r82
Taxes, Regulation, and Business Association Design	p. 184
Securities Regulation	p. 186
Employment Discrimination	p. 189
General Thoughts on Tax and Regulation	p. 192
Uncorporatinc The Large Firm	p. 193
The Troubles with Corporate Governance	p. 195
Shareholder Voting	p. 195
Board of Directors	p. 199
Fiduciary Duties	p. 203
Takeovers	p. 205
Incentives and Discipline in the Large Uncorporation	p. 207
Managerial Compensation	p. 208
Distributions	p. 209
Buyout and Liquidation	p. 212
Supplementary Monitoring Mechanisms	p. 213
Uncorporate Ungovemance	p. 214
Undirectors	p. 214
Undemocracy	p. 215
Takeover Proofing	p. 217
Fiduciary Unduties	p. 219
Examples of Uncorporate Governance of Large Firms	p. 222
Private Equity	p. 222
Venture Capital	p. 226
Activist Hedge Funds	p. 228
Publicly Traded Partnerships	p. 231
Why Uncorporate Now?	p. 234
The Demand for Capital Lock-In	p. 234
New Governance Technologies	p. 235
Fleeing Sarbanes-Oxley	p. 235
Credit Costs and the Role of Debt	p. 236
The Future of the Large Uncorporation	p. 237
Financial Engineering	p. 238
Financial Regulation	p. 240
Regulation of Uncorporations	p. 241
The Corporate Tax	p. 243
The Future of Publicly Held Uncorporations	p. 245
The Corporate/Uncorporate Partnership	p. 246
New Directions	p. 247
Convergence or Divergence of Business Forms	p. 247
The Long-Term Future of the Uncorporation	p. 249
The Uncorporation and Mandatory Rules	p. 250
Toward the Disappearance of tile Close Corporation?	p. 252
The Socially Responsible Uncorporation	p. 254
Small vs. Large Firms?	p. 255
The Future of the Business Association	p. 256
Why the Uncorporation Matters	p. 256
Table of Cases	p. 259
Index	p. 265
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