Legal capital: an outdated concept

John Armour

Working Papers from Centre for Business Research, University of Cambridge

Abstract: This paper reviews the case for and against mandatory legal capital rules. It is argued that legal capital is no longer an appropriate means of safeguarding creditors' interests. This is most clearly the case as regards mandatory rules. Moreover, it is suggested that even an 'opt in' (or default) legal capital regime is unlikely to be a useful mechanism. However, the advent of regulatory arbitrage in European corporate law will provide a way of gathering information regarding investors' preferences in relation to such rules. Those creditor protection rules that do not further the interests of adjusting creditors will become subject to competitive pressures. Legislatures will be faced with the task of designing mandatory rules to deal with the issues raised by Ônon-adjustingÕ creditors in a proportionate and effective manner, consistent with the Gebhard formula.

Keywords: Corporate Law; Creditor Protection; Legal Capital; Regulatory Competition (search for similar items in EconPapers)
JEL-codes: G32 G38 K12 K22 (search for similar items in EconPapers)
Date: 2006-03
New Economics Papers: this item is included in nep-acc, nep-cfn, nep-fin, nep-fmk, nep-law and nep-reg
Note: PRO-2
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.jbs.cam.ac.uk/wp-content/uploads/2023/05/cbrwp320.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cbr:cbrwps:wp320

Access Statistics for this paper

More papers in Working Papers from Centre for Business Research, University of Cambridge
Bibliographic data for series maintained by Ruth Newman ().