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company and as the residual claimant have the greatest stake in the outcome of the
company‟s business. 13
The premise that shareholders are owners of a corporation can be drawn from
historical perspectives. 14 When the joint stock companies emerged during the end of
the eighteenth and early nineteenth centuries, the structures of these companies were
not much different from partnerships. 15 The concept of corporate personality and
separate legal personality were foreign at the time and the shareholders were the
company. During those times companies were managed by managers who were also
shareholders. In managing those companies, director-owners would control all
decision-making in the companies and the primary concern was to maximize profits,
making as much possible.
Through time, the structures of companies began to change and so did the nature of
shareholding in the company. The changes were prompted by the need to seek funds
to finance public projects such as railways. 16 These high fixed assets companies were
managed by directors who were merely agents of the shareholders. Companies
continue to evolve from then on and with the concentration of economic power and
wealth, the increasing size of corporations created a dispersion of ownership of
shares. This, in turn, caused a weaker control over the company because share
ownership was not concentrated in one person or group.
13 Ibid.
14 See Chapter 4 of the thesis for the historical aspects of the corporations.
15 David Millon “New directions in corporate law: Communitarians, contractarians and the crisis in
corporate law” (1993) 50 Washington & Lee LR 1373 at 1379.
16 Cheffins above n 8 at 541; Len Sealy 'Directors' "Wider" Responsibilities - Problems Conceptual,
Practical and Procedural' (1987) 13 Monash U.L Rev 164 at 181; Thomas Telfer 'Risk and
Insolvent Trading' in Ross Grantham and Charles Rickett (eds), Corporate Personality in the 20th
Century (Hart Publishing Oxford, 1998) at 127- 128.
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