Document Type



Presented at the 5th Inter-University Graduate Student Conference at Cornell Law School, March 2009.


Publicly traded companies make up only a small fraction of the vast number of corporations operating in the US today. Only about 10,000 companies are traded publicly while there are roughly 20 million corporations doing business in the US. Likewise, over 245 private corporations’ annual revenues exceed $1 billion. Among these, more than twelve employ more than 50,000 employees. Despite the influence on vast amounts of people and capital legislature has, to a large degree, focused on publicly traded companies. The reasons for this stem, in large, back to the years of the market crash in the early thirties and has since given rise to a multitude of regulatory and legislative actions. The recent scandals giving rise to the Sarbanes Oxley Act and, most likely, new regulation pertaining to the recent credit crisis impacts the governance of companies across the globe. Different regulatory schemes have evolved to remedy situations arising in an ever more complex corporate market. In the US, a system of enabling legislation has arisen. The basic principle is that freedom of contract will create a more efficient market. Choosing in which state and how to incorporate will allow for decisions regarding form, taxes, liabilities and contractual rights. In Europe, regulation has instead focused in part on safeguarding rights be enacting regulations to limit certain actions and the restrictions imposed are based on which nation you start your enterprise in. The paradox of whether to enable efficient markets by creating freedom or safeguarding against venture capital vultures becomes strikingly apparent in the close corporation. This article aims to compare elements of the regulatory policies in the largest per capita private equity market in the world, the United States, and the third largest, Sweden. After I describe how approaches to corporate governance in the US might impact the private equity market (by imposing fiduciary duties and how those duties can be circumnavigated ex ante) I will describe the Swedish corporate regulatory environment. Special focus will be given to differences in capital requirements and how fiduciary duties play a role in maintaining shareholder rights. By describing the different approaches to regulating corporate governance a picture starts to emerge which shows that despite differences in governance techniques and risk allocation devices employed, an effective market seems to have emerged in both countries.

Date of Authorship for this Version

April 2009


Sweden, Corporate governance, Close corporations