European Business Organization Law Review 7: 29-38 29
T M C SSER PRESS DOI© 2006 . . .A 10.1017/S1566752906000292
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Legal Capital: A Navigation System for Corporate Law
Scholarship


Holger Fleischer∗


1. Creditor protection law and legal capital ................................................... 30
1.1 Morphology of creditor protection law...................................................... 30
1.1.1 Creditor protection law as a cross-section subject ..................................... 30
1.1.2 Creditor protection law as a ‘movable system’.......................................... 30
1.2 Competing designs of creditor protection.................................................. 31

2. Anatomy of legal capital............................................................................ 31
2.1 Protective dimensions of legal capital ....................................................... 31
2.1.1 Shareholder protection............................................................................... 31
2.1.2 Creditor protection: voluntary and involuntary creditors........................... 32
2.2 Types of companies ................................................................................... 33
2.2.1 Private and public companies .................................................................... 33
2

.2.2 Groups of companies ................................................................................. 34
3. Analytical framework for legal capital ...................................................... 34
3.1 Levels of reasoning: theoretical arguments and empirical evidence.......... 34
3.2 Underlying assumptions: rational corporate actors and cognitive
deficiencies ................................................................................................ 35
3.3 Categories of legal norms .......................................................................... 36
3.3.1 Mandatory and default provisions ............................................................. 36
3.3.2 Rules and standards ................................................................................... 36
3.4 Legal and social environment .................................................................... 37
3.4.1 National preferences and legal culture....................................................... 37
3.4.2 Switching costs and path dependence........................................................ 38

Keywords: legal capital, creditor protection, rules and standards, mandatory and
default provisions, legal transplants.


∗ Professor of Law, Director of the Institute for Commercial and Economic Law, Univer-
sity of Bonn.

Holger Fleischer EBOR 7 (2006) 30
1. CREDITOR PROTECTION LAW AND LEGAL CAPITAL

I would like to use (or abuse) my comment on John Armour’s thoughtful paper to
sketch out a conceptual approach towards legal capital with an emphasis on
structure rather than on substantive regulation.

1.1 Morphology of creditor protection law

1.1.1 Creditor protection law as a cross-section subject

At the outset, one should accentuate that creditor protection is dealt with in
different areas of law. It touches company law as well as insolvency law, and it is
also deeply rooted in accounting law and contract law – to mention just the most
important fields.1 To put it differently, creditor protection law is a cross-section
subject with all the challenges, pitfalls and misunderstandings of legal frontier
regions this entails.

1.1.2 Creditor protection law as a ‘movable system’

Moreover, creditor protection law offers fertile ground for a methodological
approach associated with the Austrian legal scholar Walter Wilburg: the idea of a
movable system according to which an area of law is often structured and shaped
by different and frequently competing principles which set more or less realisable
standards.2 I might add that Wilburg received the inspiration for his conceptual
approach from comparative law studies.3 In the area of creditor protection law, the
underlying principles might be (1) transparency of creditors’ risks; (2) self-
responsibility of creditors; (3) equal treatment of creditors; and (4) barriers to ex
post risk shifting. Within this framework, legislators and courts are confronted
with the Herculean task.4 of harmonising these principles, finding consistent
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1 Similarly G. Hertig and H. Kanda, ‘Creditor Protection’, in R. Kraakman, et al., The
Anatomy of Corporate Law (Oxford, Oxford University Press 2004) p. 71: ‘The need to protect
corporate creditors, however, does not necessarily imply that corporate law must do the
protecting: the job could be left entirely to contracting between the parties or to the general law
of debtor-creditor relations.’
2 See W. Wilburg, Entwicklung eines beweglichen Systems im geltenden Recht (Graz,
Verlag Jos. A. Kienreich 1950).
3 See W. Posch, ‘Die Bedeutung des Beweglichen Systems für die Rechtsvergleichung und
das Einheitsprivatrecht’, in F. Bydlinski, H. Krejci, B. Schilcher and V. Steininger, eds., Das
Bewegliche System im geltenden und künftigen Recht (Vienna/New York, Springer 1986) p.
253 at p. 254 et seq.

4 The metaphor is taken from R.M. Dworkin, Law’s Empire (Cambridge, Harvard Univer-
sity Press 1986) p. 239.