This is a comparative study which uses a qualitative method of research. However, it casts its net over a wide range of documents such as articles of association and case-law to complement the profiling of PLLCs in the selected jurisdictions. These data were compiled in an annex to the dissertation that contains the analysis of more than two hundred articles of associations of PLLCs and nearly one hundred cases decided by courts in the selected jurisdictions. The comparative work is driven by a comparative matrix that yields the variables for the comparison. At this point, the comparative matrix is an empty table. It is meant to be filled, by the end of this dissertation, with the answers to the analytical questions it poses. I use a dynamic language which mirrors an interdisciplinary approach to law and the legal problems debated herein. Law is treated from the point of view of law and economics.
The analogy with biology serves a descriptive purpose. Context-wise, history itself is used as a case study to illustrate the contingency of law and legal practices, and the path-dependence of legal solutions. I link method to epistemology. The method serves as a means to comprehend a social phenomenon (the status quo found within PLLCs) by way of legal knowledge. For example, the systematic interpretation of technical documents sheds light on phenomena of legal imitation, the role of lawyers in developing corporate forms, the behavior of certain corporate constituencies, and the ownership and governance structures of companies. Moreover, lawyers, who draft and are accustomed to reading legal documents, are at an advantage in understanding their structure and socio-economic significance.
Methodologically, this dissertation embarks on a dialectic journey that starts with a hypothesis. I then try to falsify that hypothesis mainly through the six countries comparison and case studies. In the end, I arrive at a synthesis. On the one hand, I attempt to demonstrate, with reference to the legal concept of ‘due diligence’, that law can have its own method. On the other hand, I also show the permeability of law vis-à-vis other social sciences.
Appreciating the extent of this permeability is a major challenge not only at the methodological, but also the substantive level.
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CHAPTER II
DISCLOSING THE PLLC’S LEGAL REGIME THROUGH A HISTORICAL OVERVIEW AND EMPIRICAL EVIDENCE:
THE CASES OF PORTUGAL, FRANCE, ITALY AND SPAIN
An inspired theoretician might do as well without such empirical work, but my own feeling is that inspiration is most likely to come through the stimulus provided by the patterns, puzzles, and anomalies revealed by the systematic gathering of data, particularly when the prime need is to break our existing habits of thought.
Coase, R. H., The Firm, the Market, and the Law, Chicago, University of Chicago Press, 1988, p. 71.
Introduction
This chapter looks PLLCs in the face to understand their basic principles and main lines of ownership and governance structure. I present a historical account of the legal regime of these business associations in four out of the six jurisdictions I have selected: Portugal, France, Italy and Spain. Parenthetically, the German case may be ranked high among the possibilities for treatment, given that Germany is the motherland of the Gesellschaft mit beschränkter Haftung (GmbH) – the German form of the PLLC. It was created in 1892 and it is frequently described in the literature as pioneering. However, while designing the laboratory for this investigation several factors were considered to establish the comparative matrix and the empirical research. One of these factors was the proficiency in the German language required to scrutinize historical documents and manuscripts. These documents are likely to disclose whether a form similar to the GmbH existed before 1892 in Germany and the reasons that led German legislators to formally adopt it at that point given that, as we shall see below, the PLLC existed in other jurisdictions before 1892 even if not legally accepted. To the best of my knowledge, there still is space in German literature to develop this issue.111
111 For recent literature on the subject see, for example, Völker, Bastian, Die Vinkulierung von GmbH-Geschäftsanteilen, Schriften zum Handels- und Gesellschaftsrecht, Band 124, Hamburg, Verlag Dr. Kovač, 2013
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In order to understand the PLLC’s legal regime I first try to strip it from any preconceived idea that spontaneity of the law is a given fact. I consider the law a byproduct of private ordering and subjective considerations individuals have about a particular rule-setting.
The approach I take is based on the reading of parliamentary debates and specialized literature, and on the collection of empirical data. The case studies I present are narratives of the PLLC, and they were chosen to illustrate the profile of the PLLC throughout the second half of the nineteenth century until today. Their profile is given through the story-telling of the influence interest-groups have in shaping the law and their shadowed intervention with respect to legal options taken by legislators. Some of these legal options are frozen in time and in force today. The outcome is the creation of a platform of understanding of legal institutions and their natural contingency. This is done in the face of the PLLC in the sense that I try to lift the veil covering its private sphere. Moreover, in this chapter, I hope to make clear the reasons why some jurisdictions lag behind regarding the adoption of new forms of business organizations. I also strive to make apparent the main role state policies play with respect to the development of these business organizations. This chapter also provides an account of the means used by shareholders to protect the integrity of the share capital, of the governance structure and of shareholders’ interests by introducing restrictions on transfers. In fact, transfer of shares constitutes a laboratory which is in itself contingent, and which in itself creates a context.
I have selected Portugal, France, Italy, and Spain as the jurisdictions whose elements I am comparing in this chapter. They have in common the fact of being countries with a civil law system. However, dealing with these countries not only means that I am comparing different legal systems, but also that I am bringing an international perspective to this dissertation. To talk about the laws of Portugal means talking about the laws of former colonies such as Brazil, Angola, Mozambique, Cape Verde, Guinea Bissau and Easter Timor.
To talk about the laws of Spain, means redirecting the heart of the matter to the laws of Latin America’s countries (which, as we shall see, are presumed in the literature to have influenced the adoption of the LLC in the United States). To talk about the laws of France means talking about the laws in force in French former colonies. To talk about the laws of the UK112 means
(treating the German case and the problem of un-consented transfer under §15(5) of the Gesellschaften mit beschränkter Haftung (GmbHG); and Koch, Moritz, Die Vinkulierung von GmbH-Anteilen und ihre Auswirkung auf Umwandlungsvorgänge, Berlin, Duncker & Humblot, 2007 (approaching the same subject). These dissertations do not take, however, an interdisciplinary approach.
112 See Part I, chapter 3.
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not only thinking about the nature and purpose of United States laws, but also of other former British colonies such as those currently forming the Commonwealth.113
History establishes the baseline for understanding current legal solutions in these jurisdictions. Lessons from the past will, hopefully, shed light on evolutionary trends, their similarities and differences over time in the selected jurisdictions, and will make it possible for new evolutionary schemes to be considered. In this chapter, I am telling three stories.
First, I am telling a story of interests groups interfering with the outcomes of legislative policies. Second, I am telling a story of how the law is a byproduct of private ordering manifestations. Finally, I am telling a story of legal evolution of business organizations. These stories are informed in the text by three parameters: courts and legislatures (state), actors (equated with the society), and the market (economy). The special aspect of these stories is that I am looking at small businesses and at the variations of their ownership and governance structures in time through case studies and considerable archival work which serve as a qualitative platform for theoretical constructions.114 These theoretical constructions are highlighted in Parts II and III. This chapter proceeds as follows. Section 1 provides a historical account of restrictions on transfer of shares. It treats individually the cases of Portugal, France, Italy and Spain. Section 2 concludes.
1. Restrictions on transfers of shares of private limited liability companies: An