Required reading

1. D: AktG, §§ 15–19, 291–293, 302–318; HGB, §§ 266, 290, 291

2. UK: CA 2006, secs. 1159, 1162, Schedules 6 and 7

3. US: DGCL, § 220(b)(2); Exchange Act, § 20; Securities Act, § 15

Corporate groups: governance by statutory rules and judicial standards

What are “corporate groups” and why are they formed?

The corporate group

We all know the names of some corporate groups. They produce everything from common consumer items like coffee and chocolate (e.g. Nestlé) to sophisticated products like pharmaceuticals (e.g. Bayer) and aircraft (e.g. Boeing). Aside from producing and selling products under a common name, what are corporate groups? Dean Phillip Blumberg, who has written as much as anyone about corporate groups, describes them as “enterprises organized in the form of a dominant parent corporation with scores or hundreds of subservient sub-holding, subsidiary, and affiliated companies. These typically conduct a single integrated enterprise under common control and often under a common public persona.” The words “dominant” and “subservient” in Dean Blumberg's description reveal what is unusual, problematic and interesting about corporate groups. When a corporation's central management gives instructions to its branch management and the latter transfers its profits at the close of an accounting period to the central account, we do not think of the central office as “dominating” a “subservient” branch office.