Trends in Company Law Reformations and Problems of Corporate Governance in Modern Companies: Legal Development Issues for Bangladesh

Abstract

This research has been taken with the study of the problems of modern companies presented by the events of corporate collapses and corporate fraudulent events that happened around or at the beginning of this present century and the investigated facts of which initiated a program of reshaping the company regulatory framework in a certain pattern. Such reorganization program has its global dimension as evident from the reformations of company law regulatory scheme in different countries adopting "corporate governance standards" and its "implementation module" in a common pattern. This global trend has been pervasive at the outbreak of corporate fraudulent events and collapses of modern companies in different countries which all have their common implications. The demand, for finding an appropriate regulatory regime in addressing those problems, thus got the common impulse among the countries of the world. In such a common impulse for finding appropriate regulatory scheme of corporate deals, the said legal reformation trend has been further accelerated by the force of globalization of business and investment. The present research has been undertaken with the study in finding the value and efficiency in such a corporate regulatory reformation program. An in-depth study, hence, has been taken by this research from the historic background in which the company law legal framework has been developed to find whether there has been the defective legal theoretical base for which any subsequent development may result in vain attempt in treating the problems. The study thereafter run to the contextual changes in the modern companies in order to find the complicacy of the problem and what developments are required in the existing legal framework. It takes a tour through the ongoing developments programs, analyzes those with the particular necessities of the problems, points out the perception lacks in them to find the true dimension of the problems or their spreading of roots and consequent failures ensued in the legal treatments, and guides to the possible solutions to them. This research thus organized its main chapters as - Chapter IJ: Corporate Legal Entity of Company: An Historical Account of the Development of Law, Legal Theories and Their Expositions; Chapter Ill: Corporate Governance Codes: Their Emergence and Influence over Worldwide Company Law Modernization Program; Chapter IV: Directors' Duties: A Study on the Governing Principles and Modern Trends on Statutory Statement of Their Duties; Chapter V: Problems of Modern Companies: The Role of Conceptualizations of Basic Theories and Their Application to the Practical Field; Chapter VI: Events of Corporate Collapses and the Issues Raised by Them to the Development of Company Law; Chapter VII: Legal Mistreatments to the Problems of Modern Companies; Chapter Vlfl: Legal Development Issues for Bangladesh; and Chapter IX: Conclusion of the research findings. The summary findings of this research which may be stated here are that, there have been some inherent defects in the conceptualizations of some basic theories relating to the "corporate entity" of the company. Further that, the attribution and application of the "limited liability theory" to such corporate entity has been made in such unthinkable manner which latter has given rise to the problems of entity abuse forming the "corporate groups". Under the legal theoretical constructions and treatments of company's corporate entity, the modern "corporate groups" with their complex holding-subsidiary structure between the component companies got occasion to successfully use the corporate insulations at different levels of subsidiaries within the "corporate group" avoiding liabilities arising from their irresponsible business deals. For the inherent defects in the legal theoretical construction treating the company's corporate entity, latter contributed defective formulation of company-shareholder relationships and in the subsequent complication with the rise of diversified investment motivated public shareholders of modern companies, the said defective legal base obviated the legal reformers to frame the "interest-centric" "corporate governance and accountability oversight" program in the company law or in its corporate regulatory scheme. The study of historic background of company law finds that, the theory of company's "corporate legal entity" and its attributes are imported from another field which was very different and disconnected to the commercial reality of present companies. Such importation and application of theories from another filed have not been by itself the problem. The problems aroused thereafter on their unmodified application to the special contexts of this present field: firstly, failing to determine that, at which point or points for necessities the "corporate entity" of company should stand by itself to function prevailing over the natural personhood of the collective of individuals; or at which point or points for necessities the groups natural component should concede to the "legal entity" of their company; and secondly, failing to determine the precise demarcation between the rights of its members in one hand, and the rights of the company as corporate entity on the other hand. Such failure then contributed to the failure in determining the governing relationships between these two set of personality in the company. This research finds that, in the subsequent complicacy of the context of modern companies arising on their large number shareholders forming the investing public, and the use of complex corporate structures by the modern "corporate groups", the legal reformers launched haphazard legal development programs, which this research termed the "leak repairing approach", not able to bring any positive result to develop the situation. This research thus concludes that, a thorough revising step is required in reforming the company law legal framework with proper understanding of the problems of modern companies freed from any bias to the inherent conceptual setting on legal constructions governing the respective issues of this field which are suffering with their inherent defects as discussed in this research. It emphasizes that unless the initial defects in legal theoretical constructions governing the respective issues in this field are rectified, the subsequent legal development program, in treating the problems of modern companies will not produce any positive yield except complicating the existing legal environment.