The Property Origins of Corporations

Abstract

For much of the last five decades, legal scholars have debated and interrogated the idea that corporations are contractual in nature, and that it is useful to think of a corporation as a “nexus” of contracts. The emphasis on aspects of corporate law that are like contracts, and that are intended to solve “principal-agent” problems that arise in contractual relationships, has contributed to a neglect of aspects of corporate law that are more about holding property, and that are difficult to replicate via contract. The corporate form emerged in Europe out of feudal rules for holding property, and was originally applied to types of organizations that today we would call “non-profits,” long before it began to be used to organize and hold assets used for business. The property holding role of corporations remains one of its key functions. In recent decades, the property holding and asset partitioning functions have played an increasingly important role in partitioning and manipulating assets in fields such as securitization, tax avoidance, bankruptcy, and even campaign finance.