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Comparative Company Law: New Perspectives*
Published online by Cambridge University Press: 12 February 2016
Extract
It is a signal honour to have been invited to lecture at this world-renowned University—located, as some geographers would have it, at the very centre of the world. Certainly all eyes are concentrated on it at the moment. And it is an exhilarating thought that perhaps this new Law Centre will generate new legal approaches which we all seek, far transcending the limited legal problem and its solutions which we discuss tonight.
Let me say at once that in comparing Israeli and United States company law, I speak about your half of the subject—Israeli law—with much diffidence, although I am emboldened by the realization that every student of comparative law inevitably feels somewhat insecure in his grasp of law outside his own country. Still when I pondered what would be the most useful area for this lecture, I was struck by a fundamental similarity—for although we are separated geographically by half the world, the basic concerns of corporate investors are the same the world over: (1) an agreed-upon allocation of the rewards, if the corporate venture prove successful, and (2) control over management of the enterprise into which they have put their capital. Of first concern then is the law governing the corporate structure since this is what determines the investors' financial and voting rights, and secondly, the law protecting the investor against an unresponsive or irresponsible management. The legal sanctions here involved—statute law or case law—are a matter of concern to foreign capital. The reaction of foreign investors should be of special interest to you because Israel's social, economic, and political goals cannot be achieved without a substantial influx of capital investment from the outside. Foreign investors can operate either through foreign corporations doing business in Israel or through Israeli-formed companies. Tonight, because of time limitations, we confine ourselves to Israeli-formed companies. Other problems for a foreign investor, such as foreign exchange controls, do merit more than passing reference—but we cannot take time to elaborate them.
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- Copyright © Cambridge University Press and The Faculty of Law, The Hebrew University of Jerusalem 1970
References
1 World Map, English psalter, first half of the 13th Century, B.M. Add. MS. 28681, f. 9. So also map of Jerusalem (“in medio Gentium”) by George Braun & Franz Van Hoghenberg (Cologne 1575) (original in Rockefeller Museum, Jerusalem). See also Ezekiel, V. 5.
2 Israeli records list a total of approximately 40,000 (figure supplied by the office of the Registrar of Companies) registered companies. Approximately this number of corporations are incorporated every year in the State of New York (the 1969 figure was 41,720).
3 Draft Companies Bill for the State of Israel, prepared, annotated and translated from the Hebrew by the Ministry of Justice, State of Israel (Cambridge, Mass., U.S.A. 1957). The draft was prepared after study by a Company Law Reform Committee under the chairmanship of Judge Zeltner.
4 Laws of Palestine, Vol. 1, p. 161 (1929) [hereinafter cited as Companies Ordinance, 1929], amended by No. 1 of 1937.
5 Companies Act, 1929.
6 Companies Act, 1948. This statute has since been materially amended (not superseded) by Companies Act, 1967, (introduces new disclosure provisions analogous to those required in the United States by federal securities legislation; abolishes the exempt private company; strengthens the power of investigation by the Board of Trade).
7 Securities Law, 1968, No. 56.
8 Agency Law, 1965, No. 58, sec. 6.
9 Hornstein, G.D., Corporation Law and Practice, St. Paul, Minn., 1959, Supp. 1968 [hereinafter cited as Hornstein], vol. I, secs. 27–30, 93Google Scholar.
10 Kelner v. Baxter, L.R. 2 C.P. 174 (1866).
11 Companies Ordinance, 1929, sec. 98 (details infra text of textual paragraph concluding with n. 44).
12 Hornstein, vol. I sec. 112.
13 Companies Ordinance, 1929 secs. 64 (1) (f), 66 (vote by members “entitled so to do”).
14 Hornstein, vol. I sec. 126.
15 Ibid., sec. 126, n. 98.
16 This N.Y.S.E. requirement made it necessary for Ford Motor Co. to recapitalize before it could go public in 1956.
17 Report of the [Jenkins] Company Law Committee, Cmd. 1749, para. 136, at p. 48; dissent at p. 207 (1962).
18 England has nothing comparable to cumulative voting, and the English statute makes no reference to it.
19 Hornstein, vol. I, secs. 127, 353.
20 But cf. Companies Ordinance, 1929, sec. 9, referring to the possibility of absence of a “nominal amount” in a company limited by guarantee.
21 N.Y. Session Laws 1912, ch. 351.
22 Nebraska Const, art. 12, sec. 6 (“all stock shall have a face par value”).
23 English view on this question has vacillated. Change to no-par shares was not recommended by the Report of the [Cohen] Committee on Company Law Amendment, Cmd. 6659, para. 18 (1954). It has since been recommended by Report of the [Gedge] Committee on Shares of No-Par Value, Cmd. 9112 (1954), and the Jenkins Report, supra n. 17, para. 32.
24 Hornstein, vol. II ch. 28.
25 Ibid., secs. 611–620 (inspection); secs. 477–479 (dividends).
26 Ibid., secs. 629–634.
27 Ibid., sec. 194 (Supp. 1968).
28 Companies Ordinance, 1929, sec. 29 (3)–(5).
29 Ibid., secs. 36 (1), 243. The English counterparts for these sections are Companies Act, 1948, secs. 113 and 426; for that in the preceding note, sec. 111.
30 Companies Ordinance, 1929, sec. 68.
31 Ibid., secs. 66, 103.
32 Ibid., sec. 102.
33 Companies Act, 1929, secs. 164–175.
34 Hornstein, vol. II secs. 629–634.
35 Hornstein, vol. I sec. 462.
36 Ibid., secs. 477–479.
37 Companies Ordinance, 1929, Third Schedule, Table A, Regulation 94.
38 North-West Transportation Co. v. Beatty, 17 A.C. 589 (P.C. 1887). Gower, , Modern Company Law, (2d ed., 1957), pp. 508–509Google Scholar.
39 Hornstein, vol. II secs. 627–628 (injunction); sec. 621 (voting rights); secs. 623–626 (preemptive rights).
40 2 Hare 461, 67 Eng. Rep. 189 (Ch. 1843).
41 Hornstein, , “The Shareholder's Derivative Suit in the United States”, (1967) J. Bus. Law, 282Google Scholar.
42 Del. Code Ann. tit. 8, sec. 212 (a), as amended by Del. Laws. 1969, ch.
43 Tex. Bus. Corp. Act V.A.T.S., vol. 3A, art. 2.22 (c), 3.02 (A) (8).
44 Hornstein, vol. I sec. 437 (Supp. 1968).
45 Hornstein, vol. II ch. 29. See also article cited supra n. 41.
46 Percival v. Wright, [1902] 2 Ch. 421.
47 Jones v. H. Ahmanson & Co., 81 Cal. Rptr. 592, 460 P. 2d 464 (1969) (en banc), reversing 271 Cal. App. 2d 27, 76 Cal. Rptr. 293 (Ct. App. 1969) (cause of action stated against majority shareholders for violation of their fiduciary duty to minority; the majority had transferred their shares to a holding company organized for the purpose which then sold its shares to the public at a price reflecting a vast premium).
48 Rogers v. Hill, 289 U.S. 582, 591 (1933).
49 Companies Ordinance, 1929, sec. 102.
50 Gower, , Modern Company Law, (2nd ed., 1957) pp. 544–545Google Scholar, nn. 20–25, records that under the 1948 Act only thirty-nine inspectors were appointed up to the end of 1956. The Cohen Committee had reported that under the 1929 Act there had been only nine for the period 1930–44; Report, supra n. 23, at p. 98, para. 154.
51 Companies Ordinance, 1929, secs. 148 (g), 234.
52 Draft Companies Bill, supra n. 3, secs. 109–115 (suit by holder(s) of 10% or more of the shares, or such lesser percentage as is fixed by the Rules), sec. 151 (any member may apply to the courts for protection against oppression).
54 Gower, , “Some Contrasts Between British and American Corporation Law”, (1956) 69 Harv. L. Rev. 1369, 1374CrossRefGoogle Scholar.
55 Bellamy, E., Looking Backward: 2000–1887, at pp. 54–58 (1887)Google Scholar.