Further Legal Determinants of External Finance in Scotland: An Intra-UK Market for Incorporation?

Abstract

Previously in this journal the author reviewed Scots law's corporate debt finance rules from a transaction cost perspective. Recent research has identified that use of the Scottish corporate vehicle has significantly dropped for companies listing on the London Stock Exchange, even for those companies with headquarters in Scotland. This article explores whether this could be said to be caused by differences in company law rules between English and Scots law. It identifies that there are low transaction cost differences when it comes to known differences, but that Scots law is at a disadvantage when it comes to implicit differences (for example, the nature of a share) and uncertain company law differences from English law (for example, whether the Duomatic principle, or any other equity-based English company law principle, applies under Scots law). The framework for a market for company law exists intra-UK. As such, it seems possible that the reduction in use of the Scottish form arises because of higher transaction costs when using the Scottish form. This represents a methodological development for company law more generally – an atomisation approach, distilling company law into its component private law aspects.