Contractarians view the corporation as a nexus of contracts, constituted by the express or implied consent of each party to or contracting with it. Strong-form contractarianism takes this claim literally and holds that a corporation can be created and sustained by contract alone, thanks notably to the courts’ supportive gap-filling role. We argue that this view is undermined by the way courts actually treat implied terms. While courts do attempt to fill gaps and hold parties to their bargains, they do not typically manufacture counterfactual consent by resorting to the hypothetical bargain logic of contractarianism. Even under the most flexible form of contract law, the common law contract, the capacity of courts to imply third-party obligations in multi-party contracts is highly limited. This makes the contractarian reliance on contract and the courts to construct the complex set of multi-party obligations that make up the corporate form implausible.

Many legal systems have been converging toward a US shareholder-centric model of corporate law and governance. This includes de jure rules relating to derivative enforcement. Despite convergence of the UK system towards the US model, each system continues to diverge as regards levels of shareholder enforcement. This article suggests that this divergence can be explained by the way the courts implement the derivative procedure de facto. A comparative assessment of de facto implementation in the US and the UK reveals that while courts in both systems are reluctant to interfere with the business judgment of the board, the US courts are willing to analyse whether board decisions were substantively reached, contributing to the levels of enforcement based on the way costs are allocated. Conversely, ingrained traditions of the UK courts place a high evidentiary burden on the shareholder, which they are unlikely to meet. Since costs are allocated to the loser in the UK, the factual implementation continues to serve as a strong disincentive for private shareholder enforcement and good governance. Derivative claims, enforcement, costs, civil procedure, judiciary, directors, shareholders, company law, corporate governance, convergence

The determination of the scope of the fiduciary duty of loyalty, when created by contract, is not a unitary process. It is raised following a multi-factorial enquiry, which considers the nature of the engagement, in a first stage. Here, no single factor is conclusive. It is then, in a separate, second stage, reduced by qualifying contractual terms, which are applied almost strictly logically. This second stage uses the contractual doctrines of interpretation and implication. However, since it is a form of the fiduciary doctrine of authorisation, those contractual doctrines are modified according to fiduciary principles. We argue this follows from the underlying nature of the fiduciary obligation as a way of resolving its internal tensions. While this division has not yet been fully recognised in the cases, the courts have been inching towards it. However, not fully recognising this inevitable division and eliding the two stages has led to defective reasoning and outcomes.

Empirical analysis of the statutory derivative claim: De facto application and the sine quibus non This article is an empirical investigation in to how the statutory derivative procedure is being applied de facto in comparison with the equitable procedure. Agency theory supposes that the corporate purpose is to maximise the value of the company. To do so, the "efficient contract" must be approximated between the shareholders and directors, which is one that maximises their aggregate welfare. Private enforcement through the derivative claim is one such way of doing so. However, an intractable tension exists between too much and too little litigation where there are inadequate private incentives relative to the corporate purpose. The equitable procedure did not incentivise litigation. The concern of the statutory reform was that it would be more accessible creating inadequate private incentives for shareholders to litigate. Comparing the de facto application of the two procedures we do not find evidence to suggest the statutory procedure is more accessible. Instead, we observed what we call the sine quibus non for permission. These essential conditions the courts require for permission are unlikely to be met by shareholders, creating little incentive to litigate. From this we infer directors will continue to be incentivised to deter even beneficial litigation.