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Legal Form and Economic Substance of Enterprise Groups: Implications for Legal Policy


  • Strasser Kurt A.

    (University of Connecticut Law School)

  • Blumberg Phillip

    (University of Connecticut Law School)


Although conducted world-wide through hundreds of subsidiaries and affiliates, modern large business is, in economic reality, typically a single economically integrated enterprise functioning with a common objective under the control of its parent company. Yet the prevailing legal models are, for the most part, oblivious to this. Mistakenly adopting outmoded concepts inherited from the misty past, these models focus on many separate subsidiary corporations that make up the business and necessarily overlook the larger whole. The result of this outdated view is a mismatch between business reality and legal form which has led so frequently to poor legal and regulatory decision-making and ineffectual public control. While there is change stirring today, overall the laws response to this mismatch has been piecemeal and unsystematic. After reviewing how we got to this unhappy point, this paper will sketch out a new legal theory of enterprise analysis as the basis of modern corporation law to serve the needs of the Twenty-First Century. In some areas it will replace and in other areas it will supplement existing legal models. Enterprise analysis focuses on the implementation of the underlying policies and rules of the specific body of law at issue, such as securities, tax, or bankruptcy, to determine whether the objectives of that body of law are better served in the specific matter by looking to the whole enterprise or, alternatively, to the particular corporate subsidiary entities involved. While overt recognition of this enterprise analysis has been limited, the American legal system today is in fact applying it in numerous areas.

Suggested Citation

  • Strasser Kurt A. & Blumberg Phillip, 2011. "Legal Form and Economic Substance of Enterprise Groups: Implications for Legal Policy," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 1(1), pages 1-30, January.
  • Handle: RePEc:bpj:aelcon:v:1:y:2011:i:1:n:4

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    References listed on IDEAS

    1. Muchlinski, Peter T., 2007. "Multinational Enterprises & the Law," OUP Catalogue, Oxford University Press, edition 2, number 9780199227969.
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    Cited by:

    1. repec:bpj:aelcon:v:7:y:2017:i:1:p:8:n:6 is not listed on IDEAS
    2. Biondi Yuri, 2013. "Hyman Minsky’s Financial Instability Hypothesis and the Accounting Structure of Economy," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 3(3), pages 141-166, June.
    3. Weinstein Olivier, 2013. "The Shareholder Model of the Corporation, Between Mythology and Reality," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 3(1), pages 43-60, January.
    4. repec:bpj:aelcon:v:7:y:2017:i:1:p:47:n:1 is not listed on IDEAS
    5. Weinstein Olivier, 2012. "Firm, Property and Governance: From Berle and Means to the Agency Theory, and Beyond," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 2(2), pages 1-57, June.

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