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Introduction to Company Law

Introduction to Company Law (2nd edn)

Paul Davies
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date: 25 October 2021

5. Centralized Management I

Empowering Shareholders in Widely Held Companieslocked

5. Centralized Management I

Empowering Shareholders in Widely Held Companieslocked

  • Paul DaviesPaul DaviesAllen & Overy Professor of Corporate Law, University of Oxford

Abstract

Celebrated for their conceptual clarity, titles in the Clarendon Law Series offer concise, accessible overviews of major fields of law and legal thought. This chapter examines three legal strategies for empowering shareholders in companies where there is no controlling shareholder: the decision rights strategy, the appointment rights strategy, and the affiliation strategy. Both the first and the third strategy can be used only sparingly. This is true of the decision rights strategy, which turns on involving the shareholders as a body in corporate decision-making, because it is a cure which, if used in relation to a wide range of managerial decisions, may turn out to be worse that the disease. The third strategy is feasible only in relation to the facilitation of takeover offers, where a third party (the bidder) appears as the willing purchaser at an above-market price. In contrast, the second strategy — appointment rights — can be applied generally by company law. Its impact may be lessened, however, by the inability of highly dispersed shareholding bodies to make much use of it, because of their coordination difficulties.

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