I have a working paper on SSRN titled
“Corporate
Law in Colonial India: Rise and Demise of the Managing Agency System”, the
abstract of which is as follows:
“Corporate
Law in Colonial India: Rise and Demise of the Managing Agency System”, the
abstract of which is as follows:
This paper focuses
on the managing agency system, a peculiar type of corporate governance
arrangement that emanated in India during the colonial period. Under this
system, a managing agent (either an individual, partnership firm or company)
would be appointed to manage one or more joint stock companies. The managing
agent would also hold shares in the managed companies and control their boards
of directors. While this system was introduced in the early part of the
nineteenth century to facilitate trade and investment by British businesses in
India, it was also adopted by Indian businesses. Over a period of time, its
advantages were overshadowed by mismanagement by the agents and consequent
abuse of the shareholders of the managed companies. The legal response was
ineffective as the colonial government refused to recognise or rein in managing
agents for nearly a century from its inception. It is only in 1936 that
restrictions were imposed. Following India’s independence in 1947, the
restrictions were tightened further before the system itself was abolished in
1970. This paper offers an analysis of the system using a corporate law and
governance framework, and finds the existence of several institutional,
economic, political and social factors that led to its emergence and
disappearance.
on the managing agency system, a peculiar type of corporate governance
arrangement that emanated in India during the colonial period. Under this
system, a managing agent (either an individual, partnership firm or company)
would be appointed to manage one or more joint stock companies. The managing
agent would also hold shares in the managed companies and control their boards
of directors. While this system was introduced in the early part of the
nineteenth century to facilitate trade and investment by British businesses in
India, it was also adopted by Indian businesses. Over a period of time, its
advantages were overshadowed by mismanagement by the agents and consequent
abuse of the shareholders of the managed companies. The legal response was
ineffective as the colonial government refused to recognise or rein in managing
agents for nearly a century from its inception. It is only in 1936 that
restrictions were imposed. Following India’s independence in 1947, the
restrictions were tightened further before the system itself was abolished in
1970. This paper offers an analysis of the system using a corporate law and
governance framework, and finds the existence of several institutional,
economic, political and social factors that led to its emergence and
disappearance.
